IB3K2-15 Financial Optimisation
Introductory description
This is an elective module designed specifically for non-WBS students. To find detailed availability and to apply for this module, log in to my.wbs.ac.uk using your normal IT login details and apply via the my.wbs module application system. Once you’ve secured a place on my.wbs you should apply via your home department’s usual process, which usually takes place via eVision. Note that you do not require the module leader’s permission to study a WBS module, so please do not contact them to request it.
The module introduces modelling and solution approaches for mathematical programming problems arising in finance. Optimisation methods such as linear, integer, nonlinear, dynamic, and stochastic programming are motivated through practical financial decision-making problems. Key topics covered in Financial Optimisation include the theory of interest, portfolio optimisation, asset allocation, and risk management.
Module aims
The module aims to introduce modelling and solving approaches for mathematical programming problems arising in finance. The optimization methods such as linear, integer, dynamic, nonlinear and stochastic programming will be motivated through practical financial decision making problems. The main topics to be covered in Financial Optimisation include asset allocation, portfolio optimisation, risk management, expected utility maximization, and sustainable finance.
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
-Theory of Interest
-Mean-Variance Portfolio Optimisation
-CAPM and Asset Pricing
-Parameter Estimation in Portfolio Optimisation / Robust Asset Allocation
-Discrete Decisions / Constructing an Index Fund
-EUT / Optimal Growth Portfolio
-Sustainable Finance
-Risk Measures
-Dynamic Programming & Stochastic Optimal Control
-Discrete-time Portfolio Selection
Learning outcomes
By the end of the module, students should be able to:
- Define concepts and optimisation methods commonly used in finance.
- Use a range of techniques to solve typical financial optimisation problems.
- Analyse the particular challenges of modelling and solving financial optimisation problems.
- Identify appropriate methods for financial optimisation problems.
- Determine the strengths and weaknesses of different approaches.
- Analyse case studies and model the underlying problems properly.
Indicative reading list
- D. G. Luenberger, Investment Science, 2nd Edition, Oxford University Press, 2013.
- W. T. Ziemba and R. G. Vickson, Stochastic Optimization Models in Finance, World Scientific, 2006.
- G. Cornuejols and R. Tutuncu, Optimization Methods in Finance, Cambridge University Press, 2007.
- F. Fabozzi, P. Kolm, D. Pachamanova, S. Focardi, Robust Portfolio Optimization and Management, John Wiley & Sons, 2007.
Subject specific skills
Model decision making problems in finance.
Transferable skills
Distinguish between different modelling and solution approaches for finance problems.
Study time
| Type | Required |
|---|---|
| Lectures | 10 sessions of 1 hour (7%) |
| Seminars | 9 sessions of 1 hour (6%) |
| Online learning (independent) | 10 sessions of 1 hour (7%) |
| Private study | 48 hours (32%) |
| Assessment | 73 hours (49%) |
| Total | 150 hours |
Private study description
Private Study.
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D5
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Individual Assignment | 20% | 15 hours | Yes (extension) |
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Individual Assignment - the written assessment is based on problem solving. |
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Reassessment component is the same |
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Assessment component |
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| In-person Examination | 80% | 58 hours | No |
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Exam
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Reassessment component is the same |
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Feedback on assessment
Feedback via my.wbs.
Pre-requisites
Students are required to have basic knowledge on mathematical modelling and statistics. The pre-requisites are (IB104) Mathematical Programming I or (IB207) Mathematical Programming II.
To take this module, you must have passed:
Courses
This module is Optional for:
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USTA-G300 Undergraduate Master of Mathematics,Operational Research,Statistics and Economics
- Year 3 of G30A Master of Maths, Op.Res, Stats & Economics (Actuarial and Financial Mathematics Stream)
- Year 3 of G30J Master of Maths, Op.Res, Stats & Economics (Data Analysis Stream)
- Year 3 of G30B Master of Maths, Op.Res, Stats & Economics (Econometrics and Mathematical Economics Stream)
- Year 3 of G30C Master of Maths, Op.Res, Stats & Economics (Operational Research and Statistics Stream)
- Year 3 of G30C Master of Maths, Op.Res, Stats & Economics (Operational Research and Statistics Stream)
- Year 3 of G30D Master of Maths, Op.Res, Stats & Economics (Statistics with Mathematics Stream)
- Year 3 of G300 Mathematics, Operational Research, Statistics and Economics
- Year 3 of G300 Mathematics, Operational Research, Statistics and Economics
- Year 3 of G300 Mathematics, Operational Research, Statistics and Economics
- Year 4 of G30A Master of Maths, Op.Res, Stats & Economics (Actuarial and Financial Mathematics Stream)
- Year 4 of G30J Master of Maths, Op.Res, Stats & Economics (Data Analysis Stream)
- Year 4 of G30B Master of Maths, Op.Res, Stats & Economics (Econometrics and Mathematical Economics Stream)
- Year 4 of G30C Master of Maths, Op.Res, Stats & Economics (Operational Research and Statistics Stream)
- Year 4 of G30C Master of Maths, Op.Res, Stats & Economics (Operational Research and Statistics Stream)
- Year 4 of G30D Master of Maths, Op.Res, Stats & Economics (Statistics with Mathematics Stream)
- Year 4 of G300 Mathematics, Operational Research, Statistics and Economics
- Year 4 of G300 Mathematics, Operational Research, Statistics and Economics
- Year 4 of G300 Mathematics, Operational Research, Statistics and Economics
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USTA-G1G3 Undergraduate Mathematics and Statistics (BSc MMathStat)
- Year 3 of G1G3 Mathematics and Statistics (BSc MMathStat)
- Year 4 of G1G3 Mathematics and Statistics (BSc MMathStat)
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USTA-GG14 Undergraduate Mathematics and Statistics (BSc)
- Year 3 of GG14 Mathematics and Statistics
- Year 3 of GG14 Mathematics and Statistics
-
USTA-Y602 Undergraduate Mathematics,Operational Research,Statistics and Economics
- Year 3 of Y602 Mathematics,Operational Research,Stats,Economics
- Year 3 of Y602 Mathematics,Operational Research,Stats,Economics