Introduction to MATLAB for Finance Model Analysis

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Introduction to MATLAB for Finance Model Analysis
-????MATLAB????-
???? TeraSoft

• ???? TeraSoft,Inc.
• Irene Chen
• 2003 / 4 / 17

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• Agenda
• MATLAB Financial Product Family
• Financial related solution
• Financial Time series Toolbox
• Financial toolbox
• Financial derivative toolbox
• Integration MATLAB with Excel
• Excel Link
• MATLAB Excel Builder

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Using MATLAB to Develop and Deploy Financial
ModelsFinancial Products Group
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The MathWorks Product Family
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The MathWorks Products

• MATLAB
• Numerical computation and visualization
• MATLAB Toolboxes .. sit on top of MATLAB and
  extend its functionality
• Over 60 toolboxes in the MATLAB family
• Toolboxes can be functional ... Financial Toolbox
• Toolboxes can be task-oriented .. Optimization
  Toolbox
• 15 Toolboxes applicable to finance
• SIMULINK
• Interactive simulation of dynamic systems
• Block diagram models
• Differential equation models
• Linear and non-linear models
• Continuous-time, discrete and hybrid systems

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The FMA Product Family
Financial Blockset
Fixed Income
Analysis Modeling Algorithm Design
Financial
Simulink
Optimization
Compiler Web Server Runtime
MATLAB Math, Programming Language, Visualization,
GUI-Builder
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Off-The-Shelf Products for Financial Modelling
Data I/O
Data I/O
Data Analysis, Modeling Visualization
Data Analysis, Modeling Visualization
Data Analysis, Modeling Visualization
Data Analysis, Modeling Visualization
Reporting
Reporting
Algorithm Development Simulation
Algorithm Development Simulation
Algorithm Development Simulation
Algorithm Development Simulation
Idea Sharing
Idea Sharing
Mathematical Modeling
Mathematical Modeling
Application Development
Application Development
Financial Modelling Products

• General Modelling
• Statistics
• Optimization
• Neural Network
• Symbolic Math
• Spline
• PDE
• Curve Fitting
• System Identification
• Control System
• Fuzzy Logic

• MATLAB Compiler
• C/C Math Library
• C/C Graphics Library
• Web Server
• MATLAB Report Generator
• Excel Link
• MATLAB Excel Builder
• MATLAB COM Builder

• Financial Engineering
• Financial
• Financial Time-Series
• Financial Derivatives
• GARCH
• Simulink

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Why MATLAB?

• Handle Large Data Sets
• Powerful indexing
• Analyzing Data
• 1000s Math Graphics
• Quick Prototyping
• Less programming
• Work with existing data / programs
• C/C, Excel, VB

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Custom Tool Development

• Application Areas
• Portfolio management
• Derivative modeling
• Risk management
• Data mining
• Econometrics
• Applications
• Data import (e.g. from databases, VB, XML,)
• Monte-Carlo simulation
• Trading strategy analysis
• Graphical User Interface design
• Reporting
• Deployment (standalone, runtime, add-ins,)

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Representative Customers

• Federal Reserve Bank
• Goldman Sachs
• J.P. Morgan Chase
• Morgan Stanley
• Salomon Smith Barney
• American RE
• Merrill Lynch
• Ernst Young
• Deloitte Touche
• Putnam Investments

• Price Waterhouse Coopers
• Prudential Securities
• Bank of America
• John Hancock
• Freddie Mac
• Fannie Mae
• Moodys Investors
• Scudder Investment
• Fidelity Investments
• FleetBoston

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• Agenda
• MATLAB Financial Product Family
• Financial related solution
• Financial Time-series Toolbox
• Financial toolbox
• Financial derivative toolbox
• Integration MATLAB with Excel
• Excel Link
• MATLAB Excel Builder

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Financial Time-Series Toolbox
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Financial Time Series Toolbox

• Introduction
• Key Features
• System and Product Requirements
• Example and Demo

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Introduction to FTS Toolbox

• Providing a date-aware time series object which
  manages the relationship between data and dates
  on a financial calendar
• Provides access to data transformation, charting,
  and technical analysis
• Prepares data for further analysis using other
  tools in the MATLAB product family

gtgt newfts fints(myfts1.dates,
fts2mtx(myfts1)/100,... 'Open','High','Low',
'Close', 1, 'New FTS') newfts desc New
FTS freq Daily (1) 'dates (20)' 'Open
(20)' 'High (20)' 'Low (20)'
'Close(20)' '04-Mar-1994' 38.31
38.68 38.01 38.32 '07-Mar-1994'
38.52 38.82 38.25
38.56 '08-Mar-1994' 38.58 38.82
38.22 38.52...
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Key Features

• Data transformation and analysis
• Technical analysis
• Charting and graphics

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Data Transformation and Analysis

• Leading and lagging data
• Frequency transformation
• Filtering and differencing
• Box-Cox transformation
• Moving average and smoothing

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Technical Analysis

• Oscillators
• Moving Average Convergence Divergence (MACD)
• Accumulation / Distribution
• Stochastic
• Chaikins Volatility and Williams R
• Indexes
• Relative Strength Index (RSI)
• Indicators
• On Balance Volume (OBV) and Bollinger Bands

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Charting and Graphics

• Displays time series data in graphic form
• Plotting functions include high-low, candle, and
  annotated plots
• An interactive charting tool displays the
  relationship among several series

gtgt load disney.mat gtgt chartfts(dis)
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Financial Toolbox
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Financial Toolbox

• Handling and Converting Date
• Formatting Currency
• Charting Financial Data
• Analyzing and Computing Cash Flows
• Pricing and Analyzing Equity Derivatives
• Portfolio Analysis

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Financial Toolbox

• Handling and Converting Date
• Date Formats
• Date conversions
• Current Date and Time
• Determining Date

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Financial Toolbox

• Analyzing and Computing Cash Flows
• Annuities
• Amortization Depreciation
• Present / Future Value
• Payments Calculations
• Interest Rate / Rate of Return
• Cash Flow Sensitivities

gtgt test
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Financial Toolbox

• Pricing and Analyzing Equity Derivatives
• Sensitivity Measures
• Delta, Gamma, Lambda, Rho, Theta, Vega, Implied
  Volatility
• Analysis Pricing Models
• Black-Scholes Models
• Binomial Models

gtgt Application3\blsapp3.m
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Financial Toolbox

• Portfolio Analysis
• Mean, Var, Cov, Corrcoef
• Mean-variance model
• Capital Allocation Line
• Bond
• Sensitivity analysis
• Price calculation

gtgt Portfolio\portmodule.m
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Financial Toolbox demos
Application3
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Financial Toolbox demos
2. Portfolio Management demo
Portfolio
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Financial Derivative Toolbox
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• This toolbox builds on the MATLAB Financial
  Toolbox in the areas of fixed income derivatives
  and securities contingent on interest rates.

• Financial Instrument
• Bonds
• Bonds Options
• Fixed Rate Notes
• Floating Rate Notes

• Caps
• Floors
• Swaps

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Functions

• Creating and managing instrument portfolios

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Functions.Cont.

• Calculating prices and sensitivity indicators
• Interest Rate Term Structure
• Support instrument Bonds, Fixed Rate Notes,
  Floating Rate Notes,
• Swaps
• Sensitivity Delta and Gamma

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Functions.Cont.

• Hedging Portfolios
• Minimize cost and sensitivities
• Give target sensitivities ---- gt Minimizing the
  cost of hedging a
• 
  portfolio
• Give max target cost ---- gt Minimizing Portfolio
  Sensitivities
• Specifying constraints with ConSet
• Specify a set of linear inequality constraints
  for instruments in your portfolio (
  )
• Hedging with constrained portfolios

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• Agenda
• MATLAB Financial Product Family
• Financial related solution
• Financial Time-Series toolbox
• Financial toolbox,
• Financial derivative toolbox
• Integration MATLAB with Excel
• Excel Link
• MATLAB Excel Builder

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MATLAB link up Excel

• Integrates MATLAB math and graphics into a
  Microsoft Excel spreadsheet.

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Start Using Excel Link--Add-in Program
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Adding Excel Link to Excel
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Functions
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Benefits

• Transfer data between MATLAB and Excel in both
• direction
• Direct access to all MATLAB functions from Excel
  
• Spreadsheets
• Analysis of Excel data in MATLAB and of MATLAB
• data in Excel
• Deliver high quality graphics.

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Excel-Link Demo

• How to price an instrument portfolio using
• Heath-Jarrow-Morton interest rate model
• BDT interest rate model

Excellink_ex
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MATLAB Excel Builder
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MATLAB Excel Builder

• Introduction
• Requirements
• Features
• Demo

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MATLAB Excel Builder

• MATLAB Excel Builder works with the Compiler
  Suite to automatically generate stand-alone Excel
  add-ins from MATLAB algorithms.

VBA wrapper .dll file
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Requirements

• Product Requirements
• MATLAB
• MATLAB Compiler
• System Requirements for
• Microsoft Windows  95/98/2K/NT
• UNIX / Linux 
• Macintosh
• Compiler Requirements
• Borland C Builder 4, 5, 6
• Microsoft Visual Studio 5.0 , 6.0, NET

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Features

• Graphical User Interface(GUI)

mxltool
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Features-cont.

• Automatically creates a .dll and a Visual Basic
  Application files that can be imported into Excel

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• Creates add-in functions that can run up to 95
  faster than those created with VBA
• Readable code

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Advantages

• Unlimited capability to generate functions
• No Cost Factor
• Free Deployment

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Summary- Excel Link vs. MATLAB Excel Builder

• Excel Link
• MATLAB centric
• MATLAB and Excel Link is required on every
  end-users desktop
• Algorithms can be quickly changed using Excel
  link

• MATLAB Excel Builder
• Excel centric
• Add-ins created with Excel Builder are
  independent of MATLAB
• No Cost factor
• free distribution
• Add-ins created with Excel Builder cant be
  changed within the Excel environment

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Excel Builder Demo

• Using multiple files and variable arguments
• butterflyval
• butterflysurf

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Q A?
Irene_at_terasoft.com.tw