Applications of mathematical programming in finance

Thomas, L. (2007) Applications of mathematical programming in finance. Southampton, UK, University of Southampton, 20pp. (University of Southampton Discussion Paper Series: Centre for Operational Research, Management Sciences and Information Systems, CORMSIS-07-13).


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This talk reviews some of the applications of mathematical programming in finance. Of course mathematical programming has long been recognised as a vital modelling approach to solve optimization problems in finance. Markowitz’s Nobel Prize winning work on portfolio optimization showed how important a technique it is. Other prominent and well documented applications in long-term financial planning and portfolio problems include asset-liability management for pension plans and insurance companies, integrated risk management for intermediaries, and long-term planning for individuals. Nowadays there is an emphasis on the interaction between optimization and simulation techniques in these problems There are though many uses of mathematical programming in finance which are not purely about optimizing the return on a portfolio and we will also discuss these applications. For example we discuss how one can use linear programming to estimate the term structure of interest rates for the prices of bonds. In the personal sector finance, where the lending is far greater than the higher profile corporate sector, the use of linear programming as a way of developing credit scorecards is proving extremely valuable.

Item Type: Monograph (Discussion Paper)
ISSNs: 1356-3548 (print)
Related URLs:
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HG Finance
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 58373
Date Deposited: 15 Aug 2008
Last Modified: 23 Sep 2015 15:56

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