Many financial analysis procedures involve sets of numbers;.Matrices, matrix functions, and matrix algebra are the most efficient ways to analyze sets of numbers and their relationships. A matrix-oriented tool like MATLAB software manipulates sets of numbers more quickly, easily, and naturally.
For example, here is a 2-by-3 matrix of two bonds (the rows) with different par values, coupon rates, and coupon payment frequencies per year (the columns) entered using MATLAB notation:
Bonds = [ 1000 0.06 2
500 0.055 4 ]
Cash = [ 1500 4470 5280 -1299 ]
Referencing Matrix Elements
To reference specific matrix elements, use (row, column) notation. For example:
Bonds(1,2)
ans =
0.06
Cash(3)
ans =
5280.00
You can enlarge matrices using small matrices or vectors as elements. For example,
AddBond = [ 1000 0.065 2 ];
Bonds = [ Bonds; AddBond ]
Adds another row to the matrix and creates
Bonds =
1000 0.06 2
500 0.055 4
1000 0.065 2
Transposing Matrices
Sometimes matrices are in the wrong configuration for an operation. In MATLAB, the apostrophe or prime character (') transposes a matrix: columns become rows, rows become columns. For example,
Cash = [ 1500 4470 5280 -1299 ]'
produces
Cash =
1500
4470
5280
-1299
It's interesting to see matrices being used in this line of work.
More information can be found at this site
Richard Khoury
Hello Richard,
ReplyDeleteThanks for your post. It is basically about the USE OF MATLAB in representing matrices when doing Finance.
it is OK as a post, not related directly to the idea of real life situation problem, but acceptable. Something else would be great IF you have time!
Zeina