CHAPTER 1
Introduction
Introduction:
The Nature and Purpose of Econometrics
What is Econometrics?
Literal meaning is measurement in economics.
Definition of financial econometrics:
The application of statistical and mathematical techniques to
problems
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FIN4814 (1/2012)
Vesarach Aumeboonsuke
Matrix Application 2
Finding the spot rate at time t
Given price, coupon, and maturity of three annual coupon bonds
Bond
Price
Coupon Maturity
A
947.38
50
2
B
904.44
60
3
C
981.00
90
3
Let Dt = 1/(1+Zt)t
Bond A
Bond
2. Methodology
There are two methods to analyze the relationship between stock price and volume, which are
SIM and SEQ method.
In the first method, SIM, All investors receive the information simultaneously, revise their
expectations, and trade. In this ca
1. Solve the following system of equations using Cramers Rule, and then solve using Inverse
Matrix to verify that the answer is the same.
1. 0.75x + 0.5y = 11/2
2. 2.3x + 1.2y = 2.1
0.5x 0.25y= 1/8
4.1x 0.5y= 14.3
3. 2r + 25s = 40
4. 4a 2b 3c = -32
10r +