TIØ4317 Quantitative and Empirical
Methods in Finance
Professor
Alexei A. Gaivoronski and
Associate Professor
Course organization Contents Recommended literature Exam
Nyheter/News

Place and Time:
Lectures: Monday, 12.1515.00, EL4 Exercises: Friday, 15.1517.00, EL4 Exercise rules
1. Portfolio optimization and risk management
1. Portfolio selection and risk management in finance and insurance using modern optimization and simulation methodology
2. Modern approaches to risk management based on Value at Risk
3. Decision support for management of portfolios of industrial projects and risk management using modern financial and investment methodology in different branches of industry like energy, telecom and others.
4. Optimization and simulation methodology and commercial software for optimal financial decisions and industrial risk management
Portfolio Optimization and risk management part of the course
Lectures 
Topics 
Material 
Exercises 
Solutions 
Lecture
1 
1. Introduction to meanvariance analysis 
1. [2], pp.119125 Powerpoint
slides: Introduction to financial optimization and
risk management Meanvariance analysis, part 1 Simplest Excel implementation of
meanvariance model using only Excel functions 

Lecture
2 
1. Meanvariance analysis, continued 
1. [2], pp. 126144 Matlab files for computation of
meanvariance efficient frontier Matlab files for experiments with one
factor model 


Lecture
3 
1. Introduction to fixed income portfolio models 2. Risk measurement for fixed income portfolios 3. Fixed income portfolio models 
1. [2], pp. 147158, Powerpoint
slides 2. [2] pp. 8092 3. [2], pp.159170 Powerpoint slides Data set with indexes of
Norwegian government bills and bonds of different maturities 

Lecture
4 
1. Scenario optimization.
Meanabsolute deviation models. Regret models.
Introduction to ValueatRisk 
1. [2], pp. 100103, 173184 Powerpoint
slides 

Lecture
5 
1. Introduction
to dynamic portfolio strategies 2.
Introduction to optimization under uncertainty 
1. [2],
pp 209219 2. [2],
pp. 220233 Powerpoint
slides 


Lecture
6 
Guest
lecture of Professor Sjur Flåm 



Lecture
7 
1. Scenario optimization. VAR and Conditional Value at Risk
(CVAR) efficient portfolios. Put/call efficient frontiers 2.
Dynamic portfolio and risk management: 2.1
Asset and Liability management model 2.2 Constant mix strategies 
1. [2], pp. 184192 2.1. [2],
pp. 233244, Powerpoint slides 2.2. Formulation
of optimization problem for finding constant mix weights Example how constant mix strategy works Computation of optimal constant mix
weights 


1. Alexei A. Gaivoronski. OnLine lecture notes on financial optimization, material placed on this page
2. Stavros Zenios, Financial Optimization, book draft, 2005. Note. This draft is a courtesy of Stavros Zenios. No other use is permitted except for this course. When asked for password type guest. Only part of this book will be "pensum".
3. Selection of papers on financial optimization and risk management placed on the course page
Examples of exam exercises,
financial optimization and risk management part
Exercises Solutions More exercises More
solutions
Attention!!! These exercises are from previous exams
in the full course on Financial Optimization and Risk Management. For this
reason they may use material which was not taught during this course. Only
those exercises which are based fully on material taught during this semester
is relevant for you.
Exam 2009