Financial Modeling and Analysis

Description Topics

• Analyzing and Modeling Financial Data
• Rapidly Deploying Financial Applications
• Why Use MATLAB®
• Introduction to MATLAB in Finance

Analyzing and Modeling Financial Data

MATLAB is ideal for working with large data sets. It is an interactive system whose basic data element is an array. This allows you to solve many technical computing problems, especially those with matrix and vector formulations, in a fraction of the time it would take to write a program in a noninteractive language such as C or Fortran.

You can extend MATLAB with add-on products for financial modeling and analysis, including:

• Database Toolbox – Exchange data with relational databases
• Datafeed Toolbox – Acquire real-time financial data from data service providers
• Financial Toolbox – Analyze financial data and develop financial algorithms
• Financial Derivatives Toolbox – Model and analyze equity and fixed-income derivatives
• GARCH Toolbox – Analyze financial volatility using univariate GARCH models
• Fixed-Income Toolbox – Model and analyze fixed-income securities

"The main strengths of MATLAB for me are its ability to handle large matrices and to perform complex calculations extremely quickly. I particularly like the vectorized operation and the way that I can avoid For-loops. MATLAB also makes it very easy to build the math models, which saves a huge amount of time." Dimitrios Gkamas Manchester Business School, England

MATLAB database query builder utility lets you access any ODBC or JDBC database without knowing SQL. Click on image to see enlarged view.

MATLAB analysis tools provide technical analysis routines for computing and displaying common performance indicators. They include functions for creating charts, graphs, and reports that can support the relationships between data and dates on a financial calendar.

MATLAB lets you view and analyze time-series data. Click on image to see enlarged view.

This custom report was generated using functionality from within the Report Generator Toolbox. Click on image to see enlarged view.

Modeling

Most of our financial customers can't settle for "out-of-the-box" canned programs. They need to create and use customized tools that take advantage of their business knowledge. They use MATLAB because it allows them to quickly develop and update models for an ever-changing market.

Black-Derman-Toy Example. Click on image to see enlarged view.

MATLAB provides the environment and functions you need to build your own applications. Here is a representative list of some of the functionality The MathWorks provides for financial applications:

Ordinary and partial differential equations Signal processing Curve fitting Linear algebra Matrix manipulation Probability distributions Descriptive statistics Cluster analysis Nonlinear regression models Unconstrained nonlinear minimization Quadratic and linear programming Constrained linear least squares

Handling and converting dates Currency formatting Financial data charting Analyzing and computing cash flows Analyzing the term structure of interest rates Pricing and analyzing equity derivatives Analyzing portfolios Interest rate modeling Price sensitivity from interest term structure Heath-Jarrow-Morton model Hedging Conditional mean and variance

"Financial models are becoming increasingly complex and numerically intensive. MATLAB brings the state-of-the-art in scientific computing to financial analysts` hands. With this tool, it is now possible to implement a sophisticated financial model within a couple of hours and run it in a couple of seconds."