A NOVEL METHOD FOR MULTISTAGE SCENARIO GENERATION BASED ON CLUSTER ANALYSIS

Based on cluster analysis, a novel method is introduced in this paper to generate multistage scenarios. A linear programming model is proposed to exclude the arbitrage opportunity by appending a scenario to the generated scenario set. By means of a cited stochastic linear goal programming portfolio model, a case is given to exhibit the virtues of this scenario generation approach.Dynamic portfolio selection, stochastic linear goal programming model, multistage scenario generation, cluster analysis, arbitrage