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Tables of Contents for Computational Methods in Decision-Making, Economics and Finance
Chapter/Section Title
Page #
Page Count
Preface
xv
Contributing Authors
xvii
Part I Optimization Models
Multi-period optimal asset allocation for a multi-currency hedged portfolio
3
12
Domenico Mignacca
Attilio Meucci
Introduction
3
1
Portfolio dynamics
4
3
Optimal asset allocation
7
1
Empirical analysis
8
3
Conclusions
11
1
Appendix
11
1
Constant weights, one-currency portfolios
11
1
Constant weights, constant hedging, multi-currency portfolios
12
2
The evolution of the ratio of two lognormal processes
14
1
References
14
1
Rebalancing Strategies for Long-term Investors
15
20
John M. Mulvey
Koray D. Simsek
Introduction
15
3
Multi-Period Investment Model
18
4
The Portfolio Revision Problem
22
3
Pension Plan Example
25
5
Conclusions
30
5
References
31
4
Multistage stochastic programming in computational finance
35
14
Nalan Gulpinar
Berc Rustem
Reuben Settergren
Introduction
35
5
Quadratic Programming Model
40
2
Performance
42
3
Conclusion
45
4
References
47
2
Multistage stochastic optimization model for the cash management problem
49
28
Olivier Schmid
Introduction
49
2
A multistage stochastic optimization program for the cash management problem
51
7
Barycentric approximation
58
4
Case Study
62
10
Conclusions and Outlook
72
5
References
73
4
Robust portfolio analysis
77
12
Berc Rustem
Reuben Settergren
Introduction
77
1
The General Problem Formulation for Robust Decisions
78
2
Robustness of Worst-Case Optimisation
80
2
Benchmark Tracking with Rival Risk Scenarios
82
1
Backtesting for Rival Return Scenarios
83
2
Conclusions
85
4
References
88
1
Robust mean-semivariance portfolio optimization
89
20
Oswaldo L. V. Costa
Rodrigo de Barros Nabholz
Introduction
89
3
Preliminaries
92
6
LMI Formulation
98
2
Numerical Examples
100
3
Conclusions
103
6
Appendix: Proofs
104
2
References
106
3
Perturbative approaches for robust optimal portfolio problems
109
30
Fabio Trojani
Paolo Vanini
Introduction
110
4
Standard Partial Equilibrium Problems
114
5
Robust Partial Equilibrium Problems
119
11
Robust General Equilibrium Problems
130
5
Conclusions
135
4
References
136
3
Maxmin Portfolios in Models where Immunization is not Feasible
139
28
Alejandro Balbas
Alfredo Ibanez
Introduction
140
3
Existence of maxmin portfolios
143
1
The saddle point condition
144
2
Is minimizing dispersion measures equivalent to looking for maxmin portfolios?
146
5
Solving the maxmin portfolio in some examples
151
5
Conclusions
156
11
Appendix
160
3
References
163
4
Portfolio Optimization with VaR and Expected Shortfall
167
18
Manfred Gilli
Evis Kellezi
Portfolio choice models
168
3
The threshold accepting optimization heuristic
171
1
Application
172
9
Concluding remarks
181
4
References
182
3
Borrowing Constraints, Portfolio Choice, and Precautionary Motives
185
28
Michael Haliassos
Christis Hassapis
The model
188
4
Calibration
192
3
Effects of borrowing constraints on saving and on portfolio choice
195
6
Precautionary motives
201
4
Implications for empirical testing
205
4
Concluding remarks
209
4
References
210
3
The risk profile problem for stock portfolio optimization
213
18
Ming-Yang Kao
Andreas Nolte
Stephen R. Tate
Introduction
214
2
Notation
216
3
The Two-Stock Case
219
7
The k-Stock Case
226
5
References
229
2
A capacitated transportation-inventory problem with stochastic demands
231
18
Paveena Chaovalitwongse
H. Edwin Romeijn
Panos M. Pardalos
Introduction
232
1
Problem Descriptions and Model Formulation
233
3
A mixed-integer linear scenario optimization problem
236
2
The Dynamic Slope Scaling Procedure
238
2
Computational Experiments
240
3
Conclusion
243
6
References
247
2
Utility maximisation with a time lag in trading
249
22
L. C. G. Rogers
E. J. Stapleton
Introduction
250
1
The continuous-time problem
251
3
Asymptotics for the discrete-time model
254
7
The asymptotics of the delay effect, II
261
1
Comparing asymptotics and exact calculation
262
2
Conclusions
264
7
Appendix
265
4
References
269
2
Simulations for hedging financial contracts with optimal decisions
271
26
H. Windcliff
P.A. Forsyth
K.R. Vetzal
W.J. Morland
Introduction and Motivation
272
1
Contract Description: Segregated Fund Guarantees
273
3
A Mathematical Description of the Hedging Strategy
276
2
Simulating Contracts With Optimization Features
278
3
Results
281
13
Conclusions and Future Work
294
3
References
295
2
Automatic differentiation for computational finance
297
16
Christian H. Bischof
H. Martin Bucker
Bruno Lang
Introduction
297
1
Forward and reverse mode
298
7
AD from a User's Perspective
305
1
Available AD Tools
306
7
References
310
3
Part II Equilibria, Modelling and Pricing
Interest rate barrier options
313
12
Giovanni Barone-Adesi
Ghulam Sorwar
Introduction
313
3
Interest Rate Barrier Options
316
1
Monte Carlo Simulation of the CKLS Diffusion Process
317
5
Summary
322
3
References
322
3
Pricing American options by fast solutions of LCPs
325
14
Artan Borici
Hans-Jakob Luthi
Introduction
325
1
Definition of the pricing problem
326
5
Solution of LCP
331
6
Concluding remarks
337
2
References
338
1
Hedging with Monte Carlo simulation
339
16
Jaksa Cvitanic
Levon Goukasian
Fernando Zapatero
Asset Pricing using Monte Carlo Simulation
341
1
Construction of a Hedging Portfolio
342
3
The Retrieval of Volatility Method
345
4
Examples
349
2
Multi-factor Models
351
1
Conclusions
352
3
References
353
2
In Search of Deterministic Complex Patterns in Commodity Prices
355
24
Arjun Chatrath
Bahram Adrangi
Kanwalroop K. Dhanda
Chaos: concepts and implications for commodity markets
358
3
Testing for Chaos
361
3
Evidence from the Commodity Futures Markets
364
9
Conclusion
373
6
Appendix: Simulated Critical Values for the BDS Test Statistic
374
1
References
374
5
A review of stock market prediction using computational methods
379
26
I.E. Diakoulakis
D.E. Koulouriotis
D.M. Emiris
Introduction
379
2
Classification and Analysis of published works
381
17
Conclusions
398
7
References
399
6
Numerical strategies for solving SUR models
405
24
Paolo Foschi
Lucien Garin
Erricos J. Kontoghiorghes
Introduction
405
2
Numerical solution of SUR models
407
5
Computational aspects
412
11
Conclusions
423
6
References
425
4
Time-Frequency Representations in the Analysis of Stock Market Data
429
26
Gonul Turhan-Sayan
Serdar Sayan
Introduction
430
3
The theoretical framework
433
2
Implementation and results
435
10
Robustness of the results
445
5
Conclusions
450
5
References
451
4
Opportunity cost algorithms for combinatorial auctions
455
26
Karhan Akcoglu
James Aspnes
Bhaskar DasGupta
Ming-Yang Kao
Introduction
456
3
Simple combinatorial auctions
459
4
Properties of β
463
6
Auctions with budget constraints
469
6
Further Research
475
6
References
476
5
A finite states contraction algorithm for dynamic models
481
20
Jenny X. Li
The Model
483
3
Contractive properties
486
3
Finite Element Discretizations
489
3
Second example
492
3
On the existence of non-steady-state equilibrium path
495
2
Conclusion
497
4
References
498
3
Traffic network equilibrium and the environment
501
24
Anna Nagurney
June Dong
Patricia L. Mokhtarian
Introduction
502
2
The Traffic Network Equilibrium Model with an Environmental Criterion
504
3
Qualitative Properties
507
3
A Bicriteria Model with Policy Implications
510
6
The Algorithm
516
1
Numerical Example
517
8
Mathematical model of technology diffusion in developing countries
525
16
Ding Zhang
Alfred Ntoko
June Dong
Introduction
526
1
Enabling Environmental Factors
527
4
A Mathematical Model of Diffusion of Technology
531
3
A Numerical Example
534
2
Conclusions
536
5
References
538
3
Estimation of Stochastic Volatility Models
541
16
Francesco Bartolucci
Giovanni De Luca
Introduction
541
2
The class of SV models
543
1
Estimation methods
544
2
The approximate likelihood and its derivatives
546
4
Maximizing the approximate likelihood
550
1
An application
551
2
Discussion
553
4
References
556
1
Genetic programming with syntactic restrictions applied to financial volatility forecasting
557
26
Gilles Zumbach
Olivier V. Pictet
Oliver Masutti
Introduction
558
2
Genetic Programming with Syntactic Restrictions
560
9
Function fitting
569
4
Volatility Forecasting Models Inference
573
6
Conclusion
579
4
References
580
3
Simulation-based tests of PTM
583
22
Lynda Khalaf
Maral Kichian
Introduction
584
3
Test Equations and Endogeneity
587
5
IV-Based Tests
592
8
Conclusion
600
5
Appendix: Description of the Data
601
1
References
602
3
Credit risk assessment using a multicriteria hierarchical discrimination approach
605
K. Kosmidou
G. Papadimitriou
M. Doumpos
C. Zopounidis
Introduction and related research
605
The Multi-Group Hierarchical Discrimination Method
608
Applications
610
Conclusions
619
References
620