Carnegie Mellon University

Financial Optimization

Professor: Javier Pena

Department: Tepper

Course Number: 46976

Description: Optimization models play an increasingly important role in financial decisions. Many computational finance problems ranging from asset allocation to risk management, from option pricing to model calibration, can be efficiently solved using modern optimization techniques. This course covers several classes of optimization models (linear, quadratic, integer, and dynamic programming) encountered in financial contexts. For each model class, after a survey of the relevant theory and solution methods, we will discuss problems in mathematical finance that are amenable to that problem class. Representative Texts: Cornuejols, Pena, and Tutuncu, "Optimization Methods in Finance," Second Edition (in preparation). Chapters of this textbook will be distributed to students. Other references: Grinold and Kahn, "Active Portfolio Management." Campbell and Viceira, "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors."

Prerequisites: 46945, 46972