12 September 2008

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By Ken Nyholm

A Matlab Based User′s Guide

About the BookAbout the Author(s)Further Info
  • Enables readers to implement financial and econometric models in Matlab
  • All central concepts and theories are illustrated by Matlab implementations which are accompanied by detailed descriptions of the programming steps needed
  • All concepts and techniques are introduced from a basic level
  • Chapter 1 introduces Matlab and matrix algebra, it serves to make the reader familiar with the use and basic capabilities if Matlab. The chapter concludes with a walkthrough of a linear regression model, showing how Matlab can be used to solve an example problem analytically and by the use of optimization and simulation techniques
  • Chapter 2 introduces expected return and risk as central concepts in finance theory using fixed income instruments as examples, the chapter illustrates how risk measures such as standard deviation, Modified duration, VaR, and expected shortfall can be calculated empirically and in closed form
  • Chapter 3 introduces the concept of diversification and illustrates how the efficient investment frontier can be derived – a Matlab is developed that can be used to calculate a given number of portfolios that lie on an efficient frontier, the chapter also introduces the CAPM
  • Chapter 4 introduces econometric tools: principle component analysis is presented and used as a prelude to yield-curve factor models. The Nelson-Siegel model is used to introduce the Kalman-Filter as a way to add time-series dynamics to the evolution of yield curves over time, time series models such as Vector Autoregression and regime-switching are also presented
  • Supported by a website with online resources – www.kennyholm.com where all Matlab programs referred to in the text can be downloaded. The site also contains lecture slides and answers to end of chapter exercises

“An extremely useful book for anyone interested in actually applying MATLAB based computational techniques to fixed-income problems. Theoretically sound and practically useful: a rare combination. I decided to buy MATLAB after reading it.”
—Dr Riccardo Rebonato, Global Head of Market Risk and Quant Analytics, RBS

“This book is a wonderfully practical ‘how to’ guide for bond market empirics implemented in MATLAB, with particular strength in dynamic yield curve models. It will interest students and practitioners alike.”
—Francis X. Diebold,Joseph M.Cohen Professor of Economics, Finance and Statistics, and Co-Director of the Wharton Financial Institutions Center, University of Pennsylvania

Strategic Asset Allocation in Fixed Income Markets headshot

Ken Nyholm works in the Risk Management Division of the European Central Bank, focusing on the practical implementation of financial and quantitative techniques in the area of fixed income strategic asset allocation for the bank’s domestic and foreign currency portfolios, as well as asset and liability management for pensions. Ken holds a PhD in finance and has published numerous articles on yield curve modelling and financial market microstructure. Ken has extensive teaching and communication experience obtained from university courses at the master level, as well as conference speaking engagements, and central banking seminars.