Linear Programming: Investment with Excel Solver

[@williama.rivera9414]

Very informative and instructive video. One question; How the risks scores are determined? Thank you for teaching

[@TallysYunes]

The risk scores are just a way to estimate how risky an investment is. They are a simplified view of what's actually happening. In that sense, they could be calculated in any way that is plausible and acceptable to whoever is interested in solving the problem. For example: from a conversation with experts, from past volatility of the investments (though we all know past behavior isn't a good indicator of future behavior), from forecasts on the investments' performance, etc. In more complicated portfolio optimization models, this simple idea of a risk score is replaced by some measure of the variance of the returns of the portfolio, which turns the model into a non-linear model.

[@williama.rivera9414]

@@TallysYunes Thank you so much for answer and explanation. I'm clear in how the linear program function.

[@guliaminjonova2709]

Thank you for the super useful videos! Could you please post the video of the mathematical model you discussed in your class?

[@TallysYunes]

In this video I already give you the complete mathematical model and just go over it briefly. In class, I build it from scratch. I'm planning on making another collection of videos in which I create all the models from scratch, but they're not available yet. This is on my to-do list for 2022.

[@madeleinexu3375]

Hi Dr. Yunes, Thank you so much for providing the informative lectures. Those are great resources to help me to learn the subject effectively and efficiently. For this lecture, I am not very family with the average rate per dollar. Could you please explain more about the constraint (b)? Thank you so much for your help in advance. Kindest regards, Mad

[@TallysYunes]

You're welcome. Glad to hear the video was helpful. Constraint (b) is just an example of how to implement a weighted average type of constraint. You weigh each investment by how risky it is and average them out. This is a very simplified measure of risk. In practice, people use more complicated (and non-linear) formulas for that. But since this is an early example in the course, I'm keeping it simple for now.

[@madeleinexu3375]

@@TallysYunes Dr.Yunes, Thank you so much for taking the time to reply. It’s very much appreciated. Thank you for offering informative explanation. I will definitely keep studying your lectures to learn more. Have a wonderful day, Kindest regards, Mad

[@yohiachen6664]

With many thanks!

[@CanerErden]

Thank you so much

[@TallysYunes]

You're welcome!

[@Tanujanshu]

Very well explained 👍👍👍

[@TallysYunes]

Thank you so much!

[@NISRAMI]

Are the problems stored some place?

[@TallysYunes]

I'm not sure what you mean.