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Financial Optimization

In: Operations Research Proceedings 2006

Author

Listed:
  • Teemu Pennanen

    (Helsinki School of Economics)

Abstract

Many financial decision problems are most naturally formulated as optimization problems. This is the case, for example, in (arbitrage, utility, risk measure,...) pricing and hedging of (European, American, real,..) options, portfolio optimization and asset liability management. The optimization approach becomes even more natural in the presence of market imperfections such as transaction costs or portfolio constraints, where more traditional approaches of mathematical finance fail. Common to many financial problems, when properly formulated, is convexity with respect to the decision variables. This opens up possibilities of using numerical techniques that have been developed for large scale optimization problems.

Suggested Citation

  • Teemu Pennanen, 2007. "Financial Optimization," Operations Research Proceedings, in: Karl-Heinz Waldmann & Ulrike M. Stocker (ed.), Operations Research Proceedings 2006, pages 113-113, Springer.
    • Handle: RePEc:spr:oprchp:978-3-540-69995-8_18
    DOI: 10.1007/978-3-540-69995-8_18
    as

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