Financial Engineering

Enable financial engineering with MATLAB

Financial engineering uses mathematical finance and numerical methods to support trading, hedging, investment, and risk management decisions. Traditionally associated with sell-side financial instrument pricing, valuation, and risk analysis, the term financial engineering is also used broadly to refer to quantitative analysis in all finance disciplines and Master of Financial Engineering degree courses.

Researchers, quants, and analysts in banks, hedge funds, and asset management firms use MATLAB to price financial instruments and portfolios. With add-on toolboxes for computational finance, you can perform  tasks including:

• Price instruments including equity options, credit derivatives, commodity derivatives, and FX derivatives with Black Scholes, Black-Derman-Toy, Heath-Jarrow Morton. and Cox-Ross-Rubinstein models
• Analyze interest rates with Hull-White, Black-Karasinski, and LIBOR market model methods
• Build and analyze swap curves, zero curves, and other yield curves with Nelson-Siegel and Svensson equations, as well as splines
• Analyze stochastic volatility models such as Heston and Hull-White-Vasicek

Examples and How To

• Using MATLAB to Develop Asset Pricing Models (Webinar)
• Intuitive Analytics Uses MATLAB to Build Financial Engineering Tools to Help Bond Issuers Manage Risk (User Story)
• Investment Property Databank Develops and Deploys Real Estate Cash-Flow Models (User Story)
• Fitting Interest Rate Curve Functions (Example)
• Pricing and Hedging a Portfolio Using the Black-Karasinski Model (Example)
• Analysis of Inflation Indexed Instruments (Example)
• Financial Engineering Code and Other Resources (MATLAB Central)

Software Reference

• Stochastic Differential Equations (SDE) (Econometrics Toolbox Function Reference)
• Credit Derivatives (Fixed-Income Toolbox Documentation)
• Interest-Rate Derivatives (Financial Derivatives Toolbox Documentation)
• Pricing and Analyzing Equity Derivatives (Financial Toolbox Documentation)
• Pricing and Computing Yields for Fixed-Income Securities (Financial Toolbox Documentation)

See also: computational finance, CAPM, pricing and valuation, Monte Carlo simulation, Financial Toolbox, Econometrics Toolbox, Fixed-Income Toolbox, Financial Derivatives Toolbox