Şimşek, Koray Deniz (2008) Introduction to stochastic programming and its applications to finance. In: Fabozzi, Frank J., (ed.) Handbook of Finance: Valuation, Financial Modeling, and Quantitative Tools, Volume III. Wiley, Hoboken, NJ, USA, pp. 775783. ISBN 9780470042564
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Abstract
Mathematical programming is one of a number of operations research techniques that employs mathematical optimization models to assist in decision making. Mathematical programming includes linear programming, integer programming, mixedinteger programming, nonlinear programming, stochastic programming, and goal programming. Mathematical programming models allow the decision maker to identify the “best” solution. This is in contrast to other mathematical tools that are in the arsenal of decision makers such as statistical models (which tell the decision maker what occurred in the past), forecasting models (which tell the decision maker what might happen in the future), and simulation models (which tell the decision maker what will happens under different conditions). The meanvariance model for portfolio selection as formulated by Markowitz is an example of an application of one type of mathematical programming (quadratic programming). However, in formulating optimization models in many applications in finance, the mathematical programming model employed needs to take into consideration the uncertainty about the model’s parameters and the multiperiod nature of the problem faced. To deal with these situations, the technique of stochastic programming is employed.
Item Type:  Book Section / Chapter 

Subjects:  H Social Sciences > HG Finance 
Divisions:  Sabancı Business School Sabancı Business School > Accounting and Finance 
Depositing User:  Koray Deniz Şimşek 
Date Deposited:  09 Nov 2008 22:08 
Last Modified:  13 Nov 2008 09:16 
URI:  https://research.sabanciuniv.edu/id/eprint/10249 
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Introduction to Stochastic Programming and Its Applications to Finance. (deposited 15 Oct 2007 15:21)
 Introduction to stochastic programming and its applications to finance. (deposited 09 Nov 2008 22:08) [Currently Displayed]