Research seminar at the Financial Mathematics group
of the Department of Mathematics at Uppsala University:

		   Financial Portfolio Optimisation
By:
			    Justin Pearson
		 Department of Information Technology
		      Uppsala University, Sweden
On:
		     Monday 12th of December 2005
		at 15:15 in room 3513 of www.MIC.uu.se

Abstract:

We give an approximate and often extremely fast method of solving a
portfolio optimisation (PO) problem in financial mathematics, which
has applications in the credit derivatives market (synthetic CDO,
CDO^2, CDO squared, Russian-doll CDO, ...).  Its corresponding
satisfaction problem is closely related to the balanced incomplete
block design (BIBD) problem.  However, typical PO instances are an
order of magnitude larger than the largest BIBDs solved so far by
global search.  Our method is based on embedding sub-instances into
the original instance.  Their determination is itself a CSP.  This
allows us to solve a typical PO instance, with over 10^746 symmetries.
The high quality of our approximate solutions can be assessed by
comparison with a tight lower bound on the cost.  Also, our solutions
sufficiently improve the currently best ones so as to often make the
difference between having or not having a feasible transaction due to
investor and rating-agency constraints.  (Joint work with Pierre
Flener (UU/IT), Luis G. Reyna (Merrill Lynch, USA), and Olof
Sivertsson (UU).)