Optimization Methods in Finance

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Cambridge University Press, Dec 21, 2006 - Mathematics
Optimization models play an increasingly important role in financial decisions. This is the first textbook devoted to explaining how recent advances in optimization models, methods and software can be applied to solve problems in computational finance more efficiently and accurately. Chapters discussing the theory and efficient solution methods for all major classes of optimization problems alternate with chapters illustrating their use in modeling problems of mathematical finance. The reader is guided through topics such as volatility estimation, portfolio optimization problems and constructing an index fund, using techniques such as nonlinear optimization models, quadratic programming formulations and integer programming models respectively. The book is based on Master's courses in financial engineering and comes with worked examples, exercises and case studies. It will be welcomed by applied mathematicians, operational researchers and others who work in mathematical and computational finance and who are seeking a text for self-learning or for use with courses.
 

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Contents

Introduction
1
theory and algorithms
15
assetliability cashflow matching
41
asset pricing and arbitrage
62
theory and algorithms
80
volatility estimation
112
theory and algorithms
121
portfolio optimization
138
constructing an index fund
212
Dynamic programming methods
225
option pricing
240
structuring assetbacked securities
248
theory and algorithms
255
ValueatRisk
271
assetliability management
279
theory and tools
292

Conic optimization tools
168
Conic optimization models in finance
178
theory and algorithms
192
Robust optimization models in finance
306
Appendix A Convexity 320
338
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Popular passages

Page 338 - In H. Frenk, K. Roos, T. Terlaky, and S. Zhang, editors, High performance optimization, pages 197-232.
Page 338 - Computational Study of a Family of Mixed-Integer Quadratic Programming Problems,” Mathematical Programming 74, 121-140 (1996).
Page 339 - Kasai model: an asset/liability model for a Japanese insurance company using multistage stochastic programming. Interfaces 24 (1994) 29-49.

About the author (2006)

Gerard Cornuejols is an IBM University Professor of Operations Research at theTepper School of Business, Carnegie Mellon University.

Reha Ttnc is a Vice President in the Quantitative Resources Group at Goldman Sachs Asset Management, New York.

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