Lectures and exercises: Room 119 building 427.
Remember to bring your own laptop computers for exercises.
Time: 13.00-17.00, every Tuesday from 01/09/2009 to 01/12/2009 (both days inclusive).
No lectures on the 13/10/2007 due to autumn holidays.
1- The role of optimization in financial decision making.
2- Classification and measurement of financial risks.
3- Mean variance (Markowitz) analysis with side constraints.
4- Classical risk management models for fixed income products (examples: immunization, dedication).
5- Scenario optimization.
6- Optimization of Value at Risk (VaR) and Conditional Value at Risk (CVaR).
7- Dynamic stochastic programming (modelling).
8- Case study (optimal mortgage choice).
There will be 13 lectures and a number of assignments following each lecture. Most of the assignments are to be solved using GAMS (General Algebraic Modeling System). In order to benefit fully from the course the students are required to have basic knowledge of finance as well as mathematical programming (operations research). Students with a background in finance but with little knowledge of optimization and GAMS programming are advised to have read the GAMS tutorial before attending the first lesson. Students with a background in optimization but with little or no knowledge of financial markets and products are strongly recommended to take the course Financial Products before or at the latest at the same time as Optimization in Finance.
The students will be graded based on a final project. Much of the knowledge gained by doing the assignments during the course is of direct use in the final project.
Chosen chapters from "Practical Financial Optimization" by Stavros A. Zenios.
Will be available at campusnet.
Will be available at campusnet.
GAMS Tutorial (chapter 2 in the gams manual) by Rich Rosenthal.
Complete GAMS User's Guide (some 300 pages) .
Options, Futures, and Other Derivatives John C. Hull (2005), 6th edition.
Investment Science David Luenberger (1997), Oxford.
Lecture Notes for the Course Investerings- og Finansieringsteori. David Lando and Rolf Poulsen (2005). The notes are written in English (despite the name).
[Text to add to .emacs file (in case you already have a .emacs file under your root directory)].
[The entire .emacs file (in case you do not have this file under your root directory)].
[Instructinos for saving the files].
[Info on the use of thinlinc].
[STRIPS quotes on the Wall Street Journal Online].
[fmsbonds].