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Unformatted text preview: ISyE 6673 Financial Optimization Shabbir Ahmed Email: sahmed@isye.gatech.edu Homepage: www.isye.gatech.edu/~sahmed Class Logistics Attendance is not required, but strongly encouraged. If you attend please try to be on time, i.e., no later than 8:05!. Office hours: By appointment. Make appointment by email. Put ISyE6673 on the subject line of all your emails to me . Webpage: http://www.isye.gatech.edu/~sahmed/isye6673 username: isye password: 6673 References: Lecture notes/slides + books on reserve. TA: TBA 1 Objectives Overview of some optimization models in finance: portfolio optimization, assetliability models, term structure estimation etc. Fundamental optimization concepts; important optimization algorithms for linear, nonlinear and integer programming. Exposure to optimization software such as Excel Solver, MATLAB, GAMS and CPLEX; computational issues in large scale optimization of financial problems. Advanced optimization topics, e.g. stochastic programming and robust optimization, and their role in finance. 2 Prerequisites Linear algebra, calculus, probability, and statistics. vector/matrix operations gradient/hessian/jacobian of multivariate functions distributions, expectation, covariance Some exposure to linear programming. modeling Computer programming. C/C++, visualbasic, java, matlab Some exposure to financial instruments will be helpful. 3 Grading Homework assignments (40% of grade) Analytical and computational. Need to develop and implement optimization models, data processing routines, optimization algorithms, as well as solution validation routines. Individual work. 2 exams (60% of grade) The Midterm Exam is tentatively scheduled for Wednesday October 6, 2011. The Final Exam will be on December 15, 2011 from 8:00am. 4 Software Need access to GAMS, CPLEX, MATLAB, Excel. Available on ISyE Grad Lab, also QCF lab. 5 Class Etiquette Follow the Georgia Tech Honor Code. Timely submissions of assignments. Show up to lectures on time. Class participation strongly encouraged. Now on to the material ... 6 What is Optimization? A quantitative approach for decision making, where we seek a best decision from a set of alternatives. An example financial decision problem: Want to invest $1000.00 in three nondividend paying stocks: IBM, WMT, and SEHI for a onemonth period. Our goal is to invest in such a way that the expected endofmonth return is at least $50.00 or 5%. Furthermore, we want to make sure that the risk of not achieving our desired return is minimum. 7 Modelling Involves approximating the underlying decision problem using mathematical expressions suitable for quantitative analysis....
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 Spring '11
 ahmed

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