NMAK15000U Practical Financial Optimization

Volume 2019/2020

Week One

Day 1 Introduction to GAMS using mean variance/ mean standard deviation optimization.

Day 2 Continued introduction to GAMS. Adding practical constraints such as fixed costs, size constraints and gearing to the mean variance model. Analysing the results in Excel.

Day 3 Scenario generation and optimization. Case: index tracking and regret minimization.

Day 4 Scenario optimization continued. Case: Value at Risk and Conditional Value at Risk.

Day 5 Exchange Traded Funds and Feature Selection. Introduction to the final project on a real life asset allocation optimization and benchmarking case. 

Week Two

Day 1 The final project will be further discussed. We will work together on developing a back-testing framework for use in the final project.

Day 2-5 Work on the final project in class. Ad-hoc lectures are given based on the development of the project work.

Learning Outcome


The course gives an introduction to the domain of practical financial risk and portfolio management. Participants will work with problem areas that can be attacked using optimization models. 


Participants will be trained in quantitative evaluation of risk-return trade-offs, and learn how to model, solve, and document large, practical problems.

The course also gives an introduction to the programming language GAMS (General Algebraic Modelling Systems), which will be used extensively in all the cases and examples.

Participants who have followed the course will be able to formulate and solve optimization problems in GAMS in particular within the following areas:

  • Measuring and managing return and risk trade offs
  • Adding practical constraints to financial optimization problems
  • Immunization and dedication of a bond portfolio
  • Modelling Value at Risk and Conditional Value at Risk
  • Back-testing results of ex-ante optimization


See course contents above.

Reading material will be sent out in July.

Example of course literature:

“A GAMS Tutorial”: http:/​/​www.gams.com/​dd/​docs/​gams/​Tutorial.pdf

Zenios, Stavros A. (2008), "Practical Financial Optimization: Decision Making for Financial Engineers", Blackwell.

An introductory course in finance, an introductory course in operations research, and basic programming literacy. (The first two years of the Math/Econ-education will do nicely.)

Academic qualifications equivalent to a BSc degree is recommended.
3 hours of lectures and 3 hours of tutorials on each of the 10 (week)days August 3 to 14.

After that (or: during the 2nd week) students are given an assigment to which they must (before the regular teaching block begins) hand in written answers (a report).
  • Category
  • Hours
  • Exam Preparation
  • 6
  • Exercises
  • 30
  • Lectures
  • 30
  • Preparation
  • 70
  • Project work
  • 70
  • Total
  • 206
Continuous feedback during the course of the semester
7,5 ECTS
Type of assessment
Oral examination, 15 minutes
Written assignment, 7 days
No preparation time. The report will be the focal point of the examination.
The grade will be given based on an overall evaluation.
Only certain aids allowed

The student can bring the report for the examination.

Marking scale
7-point grading scale
Censorship form
No external censorship
Severel internal examiners

15 minutes oral exam (excl. grading) with all aids, but no preparation time. Here, the student will draw a question from a pre-specified list covering the full course contents.

Criteria for exam assesment

See Learning Outcome