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MSE 348: Optimization Under Uncertainty and Applications in Finance, Winter

How to make optimal decisions in the presence of uncertainty, solution techniques for large-scale systems resulting from decision problems under uncertainty, and selected applications in finance. Decision trees, utility, two-stage and multi-stage decision problems, approaches to stochastic programming, model formulation; large-scale systems, Benders and Dantzig-Wolfe decomposition, Monte Carlo sampling and variance reduction techniques, risk management, portfolio optimization, mortgage finance.

 

The course includes a class project, involving teams, where typically a practical financial problem is analyzed, discussed, and presented at the end of the course.

 

The course qualifies as a full project course.

 

Professor:
Gerd Infanger

Date:
Tuesday and Thursday 11:00--12:15

Location:
Huang 203

Office hours:
Tuesday and Thursday 14:00--15:00
Huang Engineering Center, 3rd floor, room 342
(best make an appointment)

Administrative support:
Lorri Papadaikis
Huang Engineering Center, 3rd floor
Phone: 650 725-0535

Text:
Infanger:  Planning Under Uncertainty, Boyd and Fraser 1994  (to be obtained from the instructor)

Additional Reading:
Birge, Louveaux:  Introduction to Stochastic Programming, Springer 1997  (recommended)

Infanger: Stochastic Programming, The State of the Art In Honor Of George Dantzig, Springer 2010  (recommended)

Dantzig and Thapa:  Linear Programming and Extensions, Part I and II, Springer 1997 and 2004 (recommended)

Project: dynamic portfolio optimization and portfolio insurance, details yet to be determined

Final Exam
: if, date and time yet to be determined