Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66912
Authors: 
Romanyuk, Yuliya
Year of Publication: 
2010
Series/Report no.: 
Bank of Canada Discussion Paper 2010-13
Abstract: 
An objective function is a key component of a strategic portfolio management model used to determine the optimal allocations of assets and, possibly, their associated liabilities over some investment horizon. The author discusses investment philosophies and perspectives for the management of foreign reserves, and investigates how to translate the three common policy objectives for reserves (liquidity, safety, and return) into objective functions for strategic reserves management. Stochastic programming is identified as an advantageous modelling framework to capture the objectives of foreign reserves management, and a strategic reserves management model is illustrated that trades off expected net returns with costs and liquidity issues related to a potential liquidation of a portion of the portfolio.
Subjects: 
Foreign reserves management
JEL: 
G11
Document Type: 
Working Paper
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