Financial Modeling and Optimization-Course Syllabus RM 392 Topic 1- uniue ! "#2$" TT% 11&""-12&3"' C() #*3## Spring 2"1+
Professor: Leon S. Lasdon Office Phone: 471-9433 E-Mail:
[email protected] Office: !" #orth $.%44 Office hours &&h 1%:3'-%:'' or () a**oint+ent &eachin, &eachin, "ssistant: "ssistant: Se(astian Sou)ris &" e-+ail: se(astian.sou)
[email protected] &" Office: !" .49' &" Office ours: M 3:''-4:'' or () a**oint+ent ourse /e( *a,e: ///.utexas.edu0courses0lasdon for *reious )ear2s ersions and our /e( *a,e on &2s !lac5(oard s)ste+ for this )ear2s course. Course Topics
1. &he &he Proc Proces esss of of Mode Modeli lin, n, 1.1 1.1 " sixsix-st sta,e a,e fra+ fra+e/ e/or or5 5 1.% 1.% &h &hee craf craftt of of +od +odel elin in, , 1.3 1.3 6isu 6isual al +o +odel delin in, , tool toolss 1.4 1.4 S*re S*read adsh sheet eet en,i en,inee neeri rin, n, 1.$ 1.$ "nal) "nal)si siss usin, usin, s*re s*read adsh shee eets ts %. inanci inancial al State+ State+ent ent Mod Modeli elin, n, %.1 !asics: !asics: inco+e inco+e state+ents state+ents (alance (alance sheets sheets cash flo/ flo/ etc %.% %.% "**l "**lic icat atio ions ns:: PP8 or*o or*ora rati tion on 3. Sin,le Sin,le Peri Period od "sse "ssett "ll "llocat ocation ion 3.1 3.1 Mean Mean- -ar aria iance nce *ortf *ortfol olio io theor) theor) 3.% 3.% a*i a*ita tall asse assett *ric *ricin in, , +odel +odel 3.3 &he scenari scenario o a**roach a**roach and and ris5 ris5 +easure +easuress other other than than ariance ariance 3.4 3.4 Maxi Maxi+i +ii in, n, ex*ec ex*ecte ted d util utilit it) ) 3.$ 3.$ Port Portfo foli lios os of *ro *roec ects ts 4. Multi* Multi*eri eriod od "sse "ssett "lloc "llocati ation on Models Models 4.1 Period Periodic ic re(al re(alanci ancin, n, and and its its (enefit (enefitss 4.% ;e(ala ;e(alanci ncin, n, to to an o*ti+a o*ti+all fixe fixed d +ix +ix $. !onds !onds and other other inco+e inco+e-*r -*roduc oducin, in, securi securitie tiess So,tare .sed
Learn to use state of the art o*ti+iation and si+ulation soft/are includin, the follo/in,: 1. Excel cel an and th the Exc Exceel So Soler fo for o*t o*ti+iation.
%. @;=S> for Monte arlo Si+ulation 3. Precision &ree for ?ecision &ree anal)sis 4. &he 8"MS al,e(raic +odelin, lan,ua,e. &his soft/are and the conce*ts underl)in, it has a**lications in all areas of (usiness. &his course is desi,ned for M!" students en,ineers o*erations research students co+*uter scientists and others /ho are interested in uantitatie +ethods and their a**lication to finance and inestin,. &he leel of +athe+atics used in the course is fairl) (asic-al,e(ra ele+entar) calculus and (asic *ro(a(ilit) and statistics. Aou also need the a(ilit) to thin5 lo,icall) and s)ste+aticall) (ut i+*roin, this a(ilit) is a course ,oal. /nstructional Met%ods
&he (asic a**roach is to learn () doin,.
&he text is Binancial Modelin,C () Si+on !ennin,a M=& Press 4rd edition %'14. &his is a ne/ edition- = used the 3 rd edition in s*rin, %'14. =t is aaila(le at the o-o* or online and should (e *urchased () each student or ,rou* of students. &he author is a *rofessor in inance at
YouTube See 6 lectures on Financial Engineering--Benningas Tel Aviv course from 2012. No login needed
Course Reuirements and 0rading
&here /ill (e four cases done in tea+s /orth 1$F each a ta5e-ho+e +idter+ /orth %'F and a ter+ *roect done in tea+s /orth %'F. &he ter+ *roect /ill inole selectin, a financial +odelin, a**lication area researchin, and /ritin, a sure) on it or (uildin, and solin, so+e *rotot)*e +odels fro+ so+e a**lication area or so+e other to*ic *ro*osed () students and acce*ted () the instructor. &he cases and ter+ *roect /ill (e co+*leted in self-selected ,rou*s of t/o to three *eo*le. Please for+ )our case ,rou*s as soon as *ossi(le. =f )ou hae *ro(le+s findin, a ,rou* *lease see +e. "t +ini+u+ )our case /rite-u* Gre*ortH should address the uestions *osed. Please use the follo/in, for+at for case re*orts: a one *a,e executie su++ar) a descri*tion of anal)sis section G+axi+u+ four *a,esH and an a**endix. &he executie su++ar) should (e a clear state+ent of )our findin,s usin, non-technical language. =t should entice the reie/er Gthe &" or +eH to /ant to read the anal)sis section. !e as clear and concise in the anal)sis section as *ossi(le. ;ele,ate an) detailed su**ortin, +aterial Ge.,. fi,ures ta(les and euationsH to an a**endix and reference it a**ro*riatel). &he entire re*ort should use 1.$ line s*acin, 1%-*oint font and one-inch +ar,ins. #o late case assi,n+ents /ill (e acce*ted since solutions /ill (e *osted or coered in class on the da) the) are due. =f )ou encounter a ,radin, *ro(le+ on a case stud) *lease see +e or the &". or each class session = /ill assi,n readin,s and *ro(le+s and it is i+*ortant that each student do the readin,s and contri(ute to solin, the *ro(le+s.
Class !
10%'
1
10%% 10%7
% 3
10%9
4
%03 %0$
$
%01'
7
%01%
I
%017
9
Topic
Tet C%apters and pages
=ntroduction +odelin, fra+e/or5 raft of +odelin, Excel and S*readsheet En,ineerin, Excel and S*readsheet En,ineerin, ase 1 *resentations Excel and s*readsheet en,ineerin, inancial state+ent h %4 +odelin, inancial state+ent h $ +odelin, inancial state+ent h +odelin,
Ot%er boo4 C%apters and pages
Readings
"rt of +odelin, h 1
Cases and 5ams
!e,in case 1
"rt of +odelin, h 1 % "rt of +odelin, h %
"rt of Modelin, ch$-
ase 1 due "rt of +odelin, ch $ !e,in ase %
%019
1'
%0%4
11
%0%
1%
303
13
30$
14
301' 301% 3017 3019 30%4
1$
30%
1
3031
Mean-ariance "sset allocation ase % *resentations "sset allocation Mean-ariance asset allocation
h 9-11
Scenario , eneration () (ootstra**in, and +onte carlo si+ulation 17 Portfolios of oil Ex*loration and Production *roects 1I
Portfolios of EP *roects
407 409
19 %'
ase 3 *resentations Multi*eriod asset allocation
4014
%1
Multi*eriod asset allocation
401
%%
Multi*eriod asset allocation
40%1
%3
40%I
h I-9
Multi-factor asset h 1%-13 allocation +odels !lac5-Litter+an Model Scenario +odels ris5 +easures other than ariance 8lo(al tri*s infor+al classes 8lo(al tri*s infor+al classes S*rin, (rea5 S*rin, (rea5 Scenario +odels ex*ected utilit) as a ris5 +easure
40%
40%3
h I
!onds and other securities for inco+e *ortfolios %4 !onds and other securities for inco+e *ortfolios %$ !onds and other securities for inco+e *ortfolios
ase % due Juadratic !e,in case 3 *ro,ra++in, 3scen.xls
Scenario *a*ers under readin,sKsin,le *eriod asset allocation
Pa*ers on ex*ected utilit) under readin,sKdecision anal)sis
Midter+ exa+ handed out
Midter+ exa+ due
Pa*ers under readin,s0EP *roect *ortfolios Pa*ers under readin,s0EP *roect *ortfolios
Portfolios of oil Ex*loration and Production *roects Portfolios of EP *roects ase 3 due
h %'-%1
h %'-%1
h %%-%3
*a*ers under readin,s0+ulti*eriod *ortfolio +odels *a*ers under readin,s0+ulti*eriod *ortfolio +odels *a*ers under readin,s0+ulti*eriod *ortfolio +odels iles under readin,s0fixed inco+e inestin, iles under readin,s0fixed inco+e inestin, iles under readin,s0fixed inco+e inestin,
!e,in case 4
!onds and other securities for inco+e *ortfolios !onds and other securities for inco+e *ortfolios
403'
$0$ $07
%
!onds and other securities for inco+e *ortfolios %7 ase 4 *resentations %I &!"
h %%-%3
iles under readin,s0fixed inco+e inestin,
!onds and other securities for inco+e *ortfolios ase 4 due &er+ *roects due durin, finals *eriod
666666666666666666666666666666666666666666666666666666666666666666666666
&he niersit) of &exas at "ustin *roides u*on reuest a**ro*riate acad e+ic acco++odations for ualified students /ith disa(ilities. or +ore infor+ation contact the Office of the ?ean of Students at 471-%$9. !) & "ustin *olic) )ou +ust notif) +e of )our *endin, a(sence at least fourteen da)s *rior to the date of o(serance of a reli,ious hol) da). =f )ou +ust +iss a class an exa+ination a /or5 assi,n+ent or a *roect in order to o(sere a reli,ious hol) da) )ou /ill (e ,ien an o**ortunit) to co+*lete the +issed /or5 /ithin a reasona(le ti+e after the a(sence. 7olicy on )cademic /ntegrity& Students who violate University rules on academic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course and/or dismissal from the University. Since such dishonesty harms the individual, all students, and the integrity of the University, policies on academic dishonesty will be strictly enforced. For further information please visit the Student Judicial Services Web site http//deanofstudents.ute!as.edu/sjs
