On a concept of household financial plan optimization model  Cover Image

On a concept of household financial plan optimization model
On a concept of household financial plan optimization model

Author(s): Paweł Rokita, Radosław Pietrzyk
Subject(s): Economy
Published by: Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu
Keywords: Personal finance; household; retirement; financial planning; intertemporal choice; life-length risk aversion

Summary/Abstract: In the paper a model of life-long financial plan for households is presented. This is a cashflow-based, discrete time, two-person household model. Its main concept is expressing risk aversion of a household as the maximum range of survival scenarios for which the plan should guarantee stable financing of household needs. This approach allows at the same time for reducing the number of survival scenarios for which the plan is optimized. The aim of this research is to present assumptions and construction of the model and show its performance under some chosen scenarios. The choice of scenarios is made in the way that the different riskiness of different plans is explicitly shown without a need of performing a thorough sensitivity analysis nor applying any kind of risk measure.

  • Issue Year: 2015
  • Issue No: 381
  • Page Range: 314-333
  • Page Count: 20