Case Study: Mortgage Pipeline Hedging

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Case study background and problem formulations

Instructions for optimization with PSG Run-File, PSG MATLAB Toolbox, PSG MATLAB Subroutines and PSG R.

PROBLEM 1: 10-fold Cross-validation (10 in-sample data and 10 out-of-sample data) for CVaR Deviation minimization

10-fold crossvalidation
Minimize Cvar_dev (minimizing 90%-CvaR deviation)

Value:
L_num(matrix_fact_out)
L_num(matrix_fact_in)
Cvar_dev(0.9, matrix_fact_in)
Meanabs_dev(matrix_fact_in)
St_dev(matrix_fact_in)
Var_risk(0.75, matrix_fact_in)
Var_risk_g(0.75, matrix_fact_in)
Var_risk(0.9, matrix_fact_in)
Var_risk_g(0.9, matrix_fact_in)
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crossvalidation(N,Matrix) = matrix operation splits input Matrix into N pairs of complementary sub-matrices
Cvar_dev = CVaR Deviation for Loss
Meanabs_dev = Mean Absolute Deviation
St_dev = Standard Deviation
Var_risk = VaR Risk for Loss
Var_risk_g = VaR Risk for Gain
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Data and solution in Run-File Environment

Problem Datasets # of Variables # of Scenarios Objective Value Solving Time, PC 3.14GHz (sec)
 problem 1 Cycle Statement Data Solution  3  900  0.4125034  <0.01