## January 31, 2008

### Portfolio re-balance

The lab project for this week is to put a version of the portfolio re-balance problem into the MATLAB standard form for linear programming. Find vectors \$f\$ and \$b\$ and a matrix \$A\$ such that the optimal trade list satisfies -
\$argmin_x f'x\$ s.t. \$Ax\le b, x\ge 0\$ where \$x=(buy_1,sell_1,buy_2,sell_2,...)'\$ for assets 1, 2, 3, etc.

Initial allocations and prices and current prices for the assets are available in the file case9.dat. The object is to minimize transactions costs (0.05 per share) and capital gains taxes (20%) on gains or losses from sales. The constraints are that the new allocations must be positive, the new weights must be within 1% of initial weights, and cash must be raised through sales to cover purchases and costs.

## January 24, 2008

### Exercise for Ch. 4

Please work out the joint maximum likelihood estimates and standard errors for the location and scale of a Cauchy random variable given a sample of independent observations.

## January 21, 2008

### Spring office hours

I would like to talk about office hours when we meet. In the fall term, I held office hours on Tuesdays evenings. Since this conflicts with Carlos' course, I want to discuss alternatives. One possibility would be for me to hold office hours on Sunday afternoons or evenings.

### Introduction to FM5032

Welcome to the second half of the data analysis, simulation, and portfolio optimization, which starts Wednesday and runs through March 5.

The schedule indicates that we have a different room in Ford Hall this term: FordH B10. I have not checked on it yet; but I assume there will be no problems. Let's plan to meet there at 5PM on Wednesday.

We will not need to use the Lind Hall lab in the first week. Our goal will be to finish the Meucci text, leading up to robust methods for portfolio optimization with uncertainty and measurement error. We will also make use of the MATLAB optimization toolbox and the Bertsimas-Tsitsiklis supplemental text on optimization methods.