Practical Financial Optimization: A Library of GAMS Models

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Abstract

In Practical Financial Optimization: A Library of GAMS Models, the authors providea diverse set of models for portfolio optimization, based on the General AlgebraicModelling System. 'GAMS' consists of a language which allows a high-level, algebraicrepresentation of mathematical models and a set of solvers --- numerical algorithms ---to solve them. The system was developed in response to the need for powerful andflexible front-end tools to manage large, real-life models.The work begins with an overview of the structure of the GAMS language, anddiscusses issues relating to the management of data in GAMS models. The authorsprovide models for mean-variance portfolio optimization which address thequestion of trading off the portfolio expected return against its risk. Fixed incomeportfolio optimization models perform standard calculations and allow the user tobootstrap a yield curve from bond prices. Dedication models allow for standardportfolio dedication with borrowing and re-investment decisions, and are extendedto deal with maximisation of horizon return and to incorporate various practicalconsiderations on the portfolio tradeability. Immunization models provide for thefactor immunization of portfolios of treasury and corporate bonds.The scenario-based portfolio optimization problem is addressed with mean absolutedeviation models, tracking models, regret models, conditional VaR models, expectedutility maximization models and put/call efficient frontier models. The authorsemploy stochastic programming for dynamic portfolio optimization, developingstochastic dedication models as stochastic extensions of the fixed income modelsdiscussed in chapter 4. Two-stage and multi-stage stochastic programs extend thescenario models analysed in Chapter 5 to allow dynamic rebalancing of portfolios astime evolves and new information becomes known. Models for structuring indexfunds and hedging interest rate risk on international portfolios are also provided.The final chapter provides a set of 'case studies': models for large-scale applicationsof portfolio optimization, which can be used as the basis for the development ofbusiness support systems to suit any special requirements, including models for themanagement of participating insurance policies and personal asset allocation.The title will be a valuable guide for quantitative developers and analysts, portfolioand asset managers, investment strategists and advanced students of finance
Lingua originaleEnglish
EditoreJohn Wiley & Sons
Numero di pagine177
ISBN (stampa)1-4051-3371-5
Stato di pubblicazionePublished - 2009

Serie di pubblicazioni

NomeWiley Finance

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