MATA33H3 Lecture Notes - Lecture 5: Calibration, Elementary Matrix, Gaussian Elimination
Options & Insurance
We are lazy type of investors, and wait for the market to reach an equilibrium (settle), then we act. i.e. no arbitrage
Stocks
Company X Company Y Call Option promise to sell at $13 (i.e. customer can buy)
Moral: Solving equations <=> finding some kind of inverse
x + 2y = 5
3x - y = 1
x - y + z = 2
2x + y - z = 1
x + y - z = 0
x - y + 3z + w = 0
x - y - z + w = 1
3x + 7y - z + 3w = 2
5x - 7y - 7z - w = -2
Keeping track of your equations 1.
Only involves linear operations 2.
Moral: There is a systematic way to solve linear equations and each step is easy!
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MATA33H3 Full Course Notes
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Call option promise to sell at (i. e. customer can buy) We are lazy type of investors, and wait for the market to reach an equilibrium (settle), then we act. i. e. no arbitrage. Moral: solving equations <=> finding some kind of inverse x + 2y = 5. 3x - y = 1 x - y + z = 2. 2x + y - z = 1 x + y - z = 0 x - y + 3z + w = 0 x - y - z + w = 1. 3x + 7y - z + 3w = 2. Moral: there is a systematic way to solve linear equations and each step is easy! Every system of linear equations can be solved using these 3 steps/procedures. Each of these 3 procedures translates to a row operation. 1: multiply a row by non-zero constant, add a constant multiple of a row to another:
