Real Options for Project Schedules (ROPS) has three recursive sampling/optimization shells. An outer Adaptive Simulated Annealing (ASA) optimization shell optimizes parameters of strategic Plans containing multiple Projects containing ordered Tasks. A middle shell samples probability...

Tutorial on valuation of mortgage backed securities and collateralized mortgage obligations, including: - Structure of the mortgage market - Prepayment modeling - OAS analysis - Interest rate modeling - Numerical methods - Parallelization

We provide a Matlab quadratic optimization tool based onMarkowitz's critical line algorithm that significantly outperforms standard software packages and a recently developed operations research algorithm. As an illustration: For a 2000 asset universe our method needs less than a second to...

Traditional factor models are widely used to estimate the risk and measure the performance of mutual funds. But, these models rely on the assumption of static exposures, whereas mutual fund factor exposures are likely to vary over time. Existing approaches lack either the ability to account for...

We present a discussion of the standard approaches to asset allocation, generally falling into two camps: Mean Variance Optimization and the maximization of the final value of a wealth utility function. After describing shortcomings in both of these standard approaches, we describe a heuristic,...

In this article, we propose a simple interest rate model, which can well accommodate swaption smiles, while recovering market prices of CMS swap spreads. The model is based on a (possibly multi-factor) Gaussian short rate model coupled with parameter uncertainty. Examples of calibration to real...

We introduce an adaptive importance sampling method for the loss distribution of credit portfolios based on the Robbins-Monro stochastic approximation procedure. After presenting the subtle construction of the algorithm, we apply our adaptive scheme for calculating the risk figures of a typical...

We analyze an optimal dynamic portfolio and asset allocation policy for investors who are concerned with the performances of their portfolios relative to a benchmark. Assuming that asset returns follow a multi-linear factor model similar to the structure of Ross (1976) and that portfolio...