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Syllabus - IE447 Stochastic Programming and Financial...

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IE447: Stochastic Programming and Financial Analysis Dr. Ted Ralphs Spring 2008 1 Miscellaneous Course Information Instructor: Dr. Ted Ralphs Office: 473 Mohler Lab Phone: 8-4784 E-mail: tkr2 Office Hours: MW 4:00-5:00 or by appointment Web page: http://www.lehigh.edu/˜tkr2 Course web page: http://www.lehigh.edu/˜tkr2/teaching/ie406/ Course meeting time: MW 5:35-6:50 2 Description of Course This course concerns making sound financial decisions in an uncertain world. Increasingly, financial decision-makers are depending on optimization techniques to guide them in their decisions. We will survey the use of such methods in financial decision-making processes. Financial topics to be covered will include asset/liability management, option pricing and hedging, risk management, and portfolio optimization. The optimization techniques to be covered will include linear and nonlinear programming, integer programming, dynamic programming, and stochastic programming. As a supporting theme, the course will also emphasize effective modeling, the use of modeling languages, such as AMPL, and the use of commercial solvers for solving financial optimization problems. 3 Course Objectives The goals of this course are for students to: 1. Cultivate a basic understanding of the optimization methodologies used in financial decision- making. 2. Understand how to formulate financial optimization programs using the tools of mathematical programming. 3. Understand how to select the optimization technique most appropriate for a given financial optimization problem. 4. Understand how to use spreadsheets and modeling languages to interface with optimization software for solving financial optimization problems. 1
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4 General Course Requirements 4.1 Prerequisites I expect you to have a good undergraduate mathematics background, as well as some previous experience with mathematical modeling and a basic knowledge of probability. 4.2 Recommended Primary Text Optimization Methods in Finance, by Cornuejols and T¨ut¨unc¨u, Cambridge University Press (2007). 4.3 Reading There will be required readings associated with each lecture. Most readings will be from the course text, but students are encouraged to seek supplementary material. Links to supplementary reading material can be accessed from the course page. 4.4 Lectures You are expected to attend and participate in the lectures. Part of the grade will be determined by overall class participation. Lecture materials will be available for reference before the lecture on the course web page.
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