Fe5116

Using Matlab:
Coding functions on the fly:
– e.g., f=@(x) exp(x) - (x+2)
– x=(0:0.01:2);plot(x,f(x))
– [to add title]
– title(‘ Chart Title’)
– Find x st f(x) = 0
– If vector. Need to use . In front of operation, e.g., 10.^b instead 10^b
– Refer to ASCII table
– 0 at start of sequence refers to positive number (IEEE-754 Binary 32
(float))
Using ; hides output

Sample function (vector):

– myfun1=@(x) (1-cos(x))./(x.^2);

Following function should be written as follows in matlab

f(x) = exp(x) - x.^2 [note the .]

Kahn summation algorithm

X + eps(x) ~= x
However, x + eps(x)/2 == x

Mul refers to multiplication

– Use Horner rule to reduce no. of operations
– Horner rule leads to n sum and n mil, where n represents order of
polynomial.
Computation cost:
- flop refers to no. of floating operations

Quiz 2: content from Feb 11

– lectures were on 11 Feb, 4 Mar;11 Mar

Numerical Derivatives:
– slide 7: Total Error = alpha * (1/h) + beta * h, where beta * h is the
truncation error and alpha * (1/h) is the round-off error.

Root Search:
– refer to bisection function
– sample: myfun=@(x)exp(x)-1
[r,x]=bisection(myfun,-1,2,1e-4)
 – shortcoming of bisection method: will only return one solution even if
multiple solutions exist
– Regula Falsi method: (comparing with bisection)
– https://www.geeksforgeeks.org/difference-between-bisection-
method-and-regula-falsi-method/

Quadrature
– Gaussian integration: just apply formula. see slide 38. split f(x) into
w(x)g(x), using table in slide 39

Linear algebra:
Construct a quadratic spline which satisfies with the following conditions: from
a symmetric function
● It passes by the points x(i) and x(i+1)
● It is continuous
● Its first derivative is continuous
● Since we know the function is symmetric, we want that the first
derivative in (-1,0) is the opposite as the first derivative in (0,1)
What is the value of the spline in x=0.5 ?

to enter matrix:
– A = [1 2 3; 4 5 6;7 8 9] (e.g.,)
to enter column vector:
– B = [1;2;3]
use A\B to solve system of linear equations [matlab solution]
L U decomposition using Gauss Elimination:
[L U] = lu(sparse(X),0),
where X is the matrix

Interpolation:

⸺to solve Chebishev on data⸺

% Define the data points
x = [-1, -0.5, 0, 0.5, 1];
y = [1, 0.5, 0, 0.5, 1];

% Degree of the Chebyshev polynomial

n = 4;

% Construct the Vandermonde matrix

V = zeros(length(x), n+1);
for i = 1:length(x)
V(i,:) = chebyshevT(0:n, x(i));
end

% Solve the least squares problem

c = V \ y';

% Evaluate the Chebyshev polynomial at 100 equally spaced points in [-1, 1]

xx = linspace(-1, 1, 100);
yy = zeros(size(xx));
for i = 1:length(xx)
yy(i) = chebyshevT(0:n, xx(i)) * c;
end

% Plot the data points and the Chebyshev polynomial

plot(x, y, 'o', xx, yy);

⸻—end⸻—

piecewise linear interpolation:

% Define the data points
x = [0 1 2 3 4];
y = [0 2 1 4 3];

% Define the query points

xi = linspace(0, 4, 101);

% Perform piecewise linear interpolation

yi = interp1(x, y, xi, 'linear');

% Plot the data points and the interpolated curve

plot(x, y, 'o', xi, yi);

plot(x,y,’o’,xx,yy);
To interpolate based on curve:
% Get y value at x = 0.5
x_val = 0.5;
y_val = interp1(xx, yy, x_val);

⸺
Gauss-Hermite estimation:
% Define function to integrate
f = @(x) exp(-x.^2);

% Gauss-Hermite weights and abscissa for 3 points

w = [0.2954, 1.1816, 0.2954];
x = [-0.7746, 0, 0.7746];

% Compute integral
I = gauss_hermite_integrate(f, w, x);

% Display result
disp(['Approximate integral: ', num2str(I)]);

⸻
Trees: (25th Mar)
– americanBinomialVec preferred to americanBinomialPricer
– Solving X = ln(s), system of 3 equations with 2 unknowns:
– NEED TO USE [ ]!!!
– e.g., in [d,u,p] = parametersBinomGBMCRR(0.07,0,0.3,2,4)
–

Use gbm_forward_price to solve: A stock price follows a geometric

motion with constant parameters. The 2y forward price is 12. The spot price
is 10. What is the 1y forward price?

inverse of Diagonal matrix.

matrix = [[1,2],[3,4]]
D = [[sqrt(1),0],[0,sqrt(4)]]
D inv = [[1/sqrt(1)],[1/sqrt(4)]]