Practical Optimization in Finance

(the RP part; click here get ot the more official DTU home-page)


Aftermath of the Wednesday November 21-lectures

A note (or a pdf-note) with some of the stuff I said at the lectures on November 21. Latest update: Thursday November 22.
You can also get the paper the "Planning Your Own Debt" (in pdf-format too) by Søren and myself.

Aftermath of the Wednesday November 14-lectures

A note (or a pdf-note) with some of the stuff I said at the lectures on November 14.
An Excel-file illustrating how (easily) the forward fitting algorithm works. And how to price callable bonds, too.

Suggestions for final projects (RP)

The suggestions are fairly ambitious; I don't seriously expect you to do all the investigations I outline. But there are some fairly concrete things you can start working on. And then we can discuss theory & code as you work along. I don't know all the answers myself.


Aftermath of the Wednesday November 7-lectures

A note (or a pdf-note) with some of the stuff I said at the lectures on November 7. Latest update: Thursday November 8.

Aftermath of the Wednesday October 31-lectures

A note (or a pdf-note) with stuff I said (and stuff should have said) at the lectures on October 31. Latest update: Friday November 2.
An Excel-file with parameter estimation. An Excel-file with the base-case portfolio optimization problem.
(The Excel-files are not intended to polished works of computer art, but rather drafts.)
I have some notes (or: pdf-notes) on binomial specifications of stochastic interest rates models. I use the notes in a course at KU, where especially Section 8.2.1 is perceived as incomprehensible by many students. Hmmm, this is what is really interesting for us. I hope to prove the aforementioned students wrong.

Aftermath of the Wednesday October 24-lectures

I have now formulated Project 2 (in pdf-format, too). It must be handed in no later than November 15.
A note (or a pdf-note) with stuff I said (and stuff should have said) at the lectures on October 24. Latest update: Friday October 26.
A more readable (& slightly updated) pdf version of the note on "Option Pricing with Excel".
A note (or a pdf-note) by David Lando containing pretty much a summary of the lecture notes below -- but in Danish.


Hi', I'm Rolf. I'll be guest lecturing for Søren the next month or so in "Practical Optimization in Finance". I will focus considerably more on the terms 'finance' and 'practical' than on 'optimization'. Two key-phrases are: On Wednesday October 24 I will NOT give the otherwise scheduled lecture on optimal mortgage management. Rather, I'll give an introduction to option pricing in binomial models and some generalizations.
A description of this, with focus on computations, can be found here here (or here if you prefer .pdf to Postscript). The proofs of some of the statements we make can be found in lecture notes (or this for .pdf ) for a course I give at KU. The proofs are rigorous, but not particularly interesting. Or even necessary for our purposes. This theory already gives rise to many interesting computational questions.

On Wednesday October 31 I may elaborate on "frequently used computational techniques", Monte Carlo simulation for instance. But I also plan to explain how the binomial pricing techniques can be applied to bond markets which is really taking the complexity one step higher. To do this. I'll need some basics about bonds (such as Chapter 3 in the lecture notes for the course mentioned above) and something about dynamic bond price models (such as Sections 8.1 and 8.2 in the lecture notes).