Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630, Fall 2010 D. Ruppert
Homework #1 solutions
1. This problem introduces you to some R functions that are useful for the analysis
of nancial markets data. If this is your rst experience using R, then you should
consult the document Using R on the
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630: Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #9
This assignment is due at 12:05pm on Wednesday November 20, 2013. Late homework is not accepted, and homework is not accepte
ORIE 4630 D. Ruppert
Homework #5 due Friday, Oct 1, 2010
Note: Students are required to work independently on homework.
1. Suppose the riskfree rate is 2% and there is one risky asset that has an expect return
of 5% and a standard deviation of the return
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
Statistics and Finance: An Introduction
David Ruppert
Errata: last updated March 9, 2009
Note: line n means the nth line from the bottom of the page.
Errors in 2nd printing
1. Page 7, line 4:
A S should be A S .
2. Page 143, Result 5.4.1, second bullet:
(
ORIE 4630 D. Ruppert
Homework #1 due Friday, Sep 3, 2010
Note: Students are required to work independently on homework.
1. This problem introduces you to some R functions that are useful for the analysis
of nancial markets data. If this is your rst experi
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
OR4630 Operations Research Tools for Financial
Engineering
Fall 2011
Assignment 4
Problem 1 Suppose the riskfree rate is 3% and there is one risky
asset that has an expect return of 5% and a standard deviation of the
return of 12%. You want to invest in
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 Fall 2011
HW4 Solutions
Problem 1
(1) Let w be the proportion allocated to the risky asset. The return standard deviation of the portfolio is wA , where A is the return standard deviation of the risky asset. To have wA = 0.06, we
need w = 0.06/A
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 D. Ruppert
Homework #9 due Friday, Oct 29, 2010 solutions
1. Par 1000 zerocoupon bonds of maturities of 0.5, 1, 1.5, and 2 years are selling at
980.39, 957.41, 923.18, and 888.489, respectively.
(a) Find the 0.5, 1, 1.5, and 2 year semiannual
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 D. Ruppert
Homework #11 due Friday, Nov 12, 2010
Note: Students are required to work independently on homework.
1. This problem uses daily stock price data in the le Stock_FX_Bond.csv. In this
exercise, use only the rst 500 prices on each stock.
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 D. Ruppert
Homework #5 due Friday, Oct 1, 2010 Solutions
Note: Students are required to work independently on homework.
1. Suppose the riskfree rate is 2% and there is one risky asset that has an expect return
of 5% and a standard deviation of
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2015
ORIE 4630 D. Ruppert
Homework #1 due Friday, Sep 4, 2015
Solutions
This assignment introduces you to some R functions that are useful for the analysis
of nancial markets data. If this is your rst experience using R, then you should
consult the document Us
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 D. Ruppert
Homework #4
This assignment will not be collected, but
in will be covered in the Exam on Sep 24
To help you study for the Exam 1, I am giving the answer to these problems now.
1. Suppose you just t at AR(2) model to a time series Yt ,
ORIE 4630 D. Ruppert
Homework #9 due Friday, Oct 29, 2010
Note: Students are required to work independently on homework.
1. Par 1000 zerocoupon bonds of maturities of 0.5, 1, 1.5, and 2 years are selling at
980.39, 957.41, 923.18, and 888.489, respective
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 D. Ruppert
Homework #6 due Friday, Oct 8, 2010 solutions
Note: Students are required to work independently on homework.
In this assignment, you will t a onefactor model with the excess returns on the market
as the factor. The S&P500 will be a p
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630: Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #10
This assignment is due at 12:05pm on Friday December 6, 2013. Late homework is not accepted,
and homework is not accepted b
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2015
ORIE 4630 D. Ruppert
Homework #11 due Friday, November 13, 2015
Students are required to work independently on homework. You should not give or
receive help from other students. You should also not receive help from students or
former students who took th
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 Exam 2 Solutions
Oct 13, 2010
1. The beta of an investors portfolio is 1.3, the expected return on this portfolio is E (RP ) =
15%, and the expected return on the market is E (RM ) = 12%? What is the riskfree rate?
Make the usual CAPM assumptio
ORIE 4630 D. Ruppert
Homework #6 due Friday, Oct 8, 2010
Note: Students are required to work independently on homework.
In this assignment, you will t a onefactor model with the excess returns on the market
as the factor. The S&P500 will be a proxy for t
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630: Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #7
Solutions
1. Suppose the riskfree rate is 1% and there is one risky asset that has an expected return of 6%
and a standard
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
Name
Net ID
Academic integrity is expected of all students of Cornell University at all times, whether
in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use, or receive unauthorized aid in this
examinati
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 Exam 1 Solutions
Sep 24, 2010
1. Let r1 , r2 , . . . be log returns that are i.i.d. N (0.05, 0.09), that is, normal with mean 0.05 and
variance 0.09. Let rt (k ) be the k period log return at time t.
(a) What is P (r3 (2) < 0.07).
[5]
Answer: P
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630: Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #9
Solutions
1. Stock in company X is selling at $95/share. Consider a forward contract to sell one share of
this company for P
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630
Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #1
This assignment is due at 12:05pm on Friday September 6, 2013. Late homework is
not accepted, and homework is not accepted by
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 D. Ruppert
Homework #12 Friday, Nov 19, 2010
Note: Students are required to work independently on homework.
On Black Monday the return on the S&P 500 was 22.8%. Ouch! This homework
assignment attempts to answer the question what was the conditio
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630: Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #10
Solutions
1. Monte Carlo (simulation) is not needed to price European call options, since we have the
BlackScholes formula
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 4630 Final Exam Solutions
Dec 14, 2009
1. The daily logreturns on a stock are normally distributed with mean 0.0002 and standard deviation
0.03. The stock price is now $97. What is the probability that it will exceed $100 after 20 trading
days? [4]
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2013
CORNELL UNIVERSITY
ORIE 4630
Operations Research Tools for Financial Engineering
Fall 2013: Prof. David S. Matteson
Assignment #1
This assignment is due at 12:05pm on Friday September 6, 2013. Late homework is
not accepted, and homework is not accepted by
Operations Research Tools for Financial Engineering
ORIE 4630

Fall 2011
ORIE 3510/5510 : Introduction to Stochastic Processes 1
Summer 2009
Practice Final
Do all problems. You have 2 hours. You can use both sides of TWO 8.5 11 sheet for whatever
formulas you want to write down. You may use any theorem, result, property from c