(If you run this example model on your own in Excel, there is some differences due to decimal roundings in my example): When I run my own Solver model, I will get the following results. Coefficients a, b1 and b2 are our changing variables in this model. Coefficient values should also have an option to have negative values and hereby, we set our non-negativity constraint to be false. Since we want the error between actual curve and our to-be-estimated curve to be as small as possible, this is minimization problem. The cell errors (initial value of 29.6609 when all coefficients are zero) is our objective function, since it sums all model errors. (rate estimate - actual rate) * (rate estimate - actual rate) R = a + b1 * (maturity) + b2 * (maturity * maturity) Rate estimate r by using 2nd degree polynomial function: in the cell errors, we have the sum of error column values. In the fourth column we have the squared difference of actual rate and our estimated rate. In the third column, we have 2nd degree polynomial function rate estimate, calculated by using coefficients a, b1 and b2. First we have some actual swap curve data in the first two columns (maturity, rate). Set up the following data into Excel worksheet.
More information about Solver functions can be read from here False or omitted to return the results and display the Solver Results dialog box.
UserFinish: True to return the results without displaying the Solver Results dialog box. SolverSolve - Begins a Solver solution run. False, if negative values for decision variable(s) are allowed. AssumeNonNeg: True, if the lower limit for decision variable(s) need to be zero. SolverOptions - Allows you to specify advanced options for Solver model. Every existing setting in Solver Options subwindow can be configured within this function. Just for an example, we configure non-negativity settings. B圜hange: this cell/cells reference is our changing model variable(s). ValueOf: if MaxMinVal is 3, we specify the value to which the objective function value is matched. MaxMinVal: integer value of 1 (maximize), 2 (minimize) or 3 (value of). SetCell: this single cell reference is our objective function. SolverReset - Resets all cell selections, constraints and restores all the settings to their defaults. However, let us first get some familiarity with the most important Solver methods needed in our example Solver program: As a practical example, we will use our Solver program to perform a curve-fitting routine. If you need some refresh in this topic, you can check the following links to get some overview: (fitting lines and polynomial curves to data points) and In the case you did not know yet, it is also possible to use Solver in your VBA program. In this post, I am opening one possible way to implement Solver functionality to be used in VBA program. Excel Solver XLAM-addin by Frontline is a handy tool for small optimization problems.
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