IE444 Operations Research in Finance

Instructor: M. C. Pinar
Room: 305
Office Hours: Wednesdays 15:30-17:15
Textbook and Reference Material:           Homework 5: Due, April 29, 2004.
           1. Using the MS EXCEL file data.xls of  HW 4,  compute a minimum CVaR portfolio at 95 %. Assume all historical
              returns (mu) equally likely in approximating the CVaR. The set of feasible portfolios is described by the following constraints:
            0 <= x(i) <= 0.1 for  all i, e' x =1, sum(i,x(i)*mu(i)) >= mutarget, where mutarget=5 %. Remember that you have to use LP.
          2. Assume you currently own the following portfolio: x0(i)=0.20 for i=1,...,5 and x0(i) =0 for i=6,...,29. Reoptimize the
        portfolio considering transaction costs for buying and selling. Solve for  three different transaction costs (0.2 %, 0.5 % and 1 %).