Practical Financial Optimization: A Library of GAMS Models

Chapter 2

Data Management

2.1 Preview

In this chapter we discuss issues relating to the management of data in GAMS models. Together with the previous chapter we complete here the introduction to GAMS, and in Section 2.4 a complete example drawn from financial planning, namely portfolio dedication, is presented.

2.2 Basics of Data Handling

It is unclear whether the heart of a financial optimization model for decision making is the data or the mathematical model. Both are indispensable for a functional and effective system: functional in that it works, and effective in that it solves the real-world problem it was designed to solve in the first place.

It is not uncommon in financial decision making for the user to deal with hundreds or even thousands of financial assets, in a variety of currencies and markets, extending over long time horizons that may run several decades into the future. Furthermore, uncertainty is prevalent and may need hundreds or thousands of scenarios to be dealt with. The user most likely will require that very large sets of data be manipulated and input to a mathematical model in order to instantiate (i.e., create a single instance of) the model that reflects the specifics of his or her problem. Hence, data handling is a critical step in all modeling applications and financial decision making is no exception.

One very important principle concerning the use of data when building models is that:

Data should be entered in its most basic form, and each data ...