Analysis and Linear Algebra For Finance Part I
Analysis and Linear Algebra For Finance Part I
Analysis and Linear Algebra For Finance Part I
and Linear Algebra for Finance: Part I
Patrick Roger
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Patrick Roger
Patrick ROGER
LaRGE Research Center
EM Strasbourg Business School
University of Strasbourg
2
Analysis and Linear Algebra for Finance: Part I
First edition
© 2013 Patrick Roger & bookboon.com (Ventus Publishing ApS)
ISBN 978-87-403-0412-1
3
Analysis
and Linear Algebra for
Finance: Part I Contents
Contents
Introduction 6
1 Preliminaries
7
1.1
Sets
and subsets
8
1.2 Binary relations
17
1.3 Mappings 20
1.4
Topology of 25
2 Functions of one variable 43
2.1
Definitions
and
notations 44
2.2 Limits and continuity 50
2.3 Differentiation 61
2.4 Logarithms
and
exponential
functions
70
2.5
Polynomial approximations and Taylor
formula 75
Potential
for development
4
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Analysis and Linear Algebra for Finance: Part I Contents
3 Integrals 81
3.1 Integral of a step function 81
3.2 General case 86
3.3 Computations 94
3.4 Improper integrals 98
4 Matrices 101
4.1 Definitions 101
4.2 Elementary algebra on matrices 104
4.3 Linear equations 115
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Analysis and Linear Algebra for Finance: Part I Introduction
6
Analysis and Linear Algebra for Finance: Part I Preliminaries
7
Analysis and Linear Algebra for Finance: Part I Preliminaries
8
Analysis and Linear Algebra for Finance: Part I Preliminaries
9
Analysis and Linear Algebra for Finance: Part I Preliminaries
CHALLENGING PERSPECTIVES
Internship opportunities
EADS unites a leading aircraft manufacturer, the world’s largest learning and development opportunities, and all the support you need,
helicopter supplier, a global leader in space programmes and a you will tackle interesting challenges on state-of-the-art products.
worldwide leader in global security solutions and systems to form
Europe’s largest defence and aerospace group. More than We welcome more than 5,000 interns every year across
140,000 people work at Airbus, Astrium, Cassidian and Eurocopter, disciplines ranging from engineering, IT, procurement and
in 90 locations globally, to deliver some of the industry’s most finance, to strategy, customer support, marketing and sales.
exciting projects.
Positions are available in France, Germany, Spain and the UK.
An EADS internship offers the chance to use your theoretical
knowledge and apply it first-hand to real situations and assignments To find out more and apply, visit www.jobs.eads.com. You can also
during your studies. Given a high level of responsibility, plenty of find out more on our EADS Careers Facebook page.
10
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Analysis and Linear Algebra for Finance: Part I Preliminaries
11
Analysis and Linear Algebra for Finance: Part I Preliminaries
12
Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
0.8
0.6
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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Analysis and Linear Algebra for Finance: Part I Preliminaries
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and
Analysis
Linear
Algebra for
Finance: Part I Preliminaries
42
Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
0.8
0.6
f(x)
0.4
0.2
0
-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1
x
46
Analysis and Linear Algebra for Finance: Part I Functions of one variable
0.5
g(x)
-0.5
-1
-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1
x
47
Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
1 ,6 0 0
1 ,4 0 0
1 ,2 0 0
1 ,0 0 0
800
600
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
1 ,3 2 0.00
1 ,3 1 9.00
1 ,3 1 8.00
1 ,3 1 7.00
1 ,3 1 6.00
1 ,3 1 5.00
1 ,3 1 4.00
1 ,3 1 3.00
1 ,3 1 2.00
3:30:04 pm 4:12:45 pm 4:55:26 pm 5:38:07 pm 6:20:47 pm 7:03:28 pm 7:46:09 pm 8:28:50 pm 9:11:31 pm 9:54:12 pm
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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20
15
10
0
-1 -0 . 5 0 0.5 1 1.5 2 2.5 3
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
-1
-2
-3
0 0 .5 1 1 .5 2 2 .5 3 3 .5 4
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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15
10
-5
-3 -2 -1 0 1 2 3 4
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Functions of one variable
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Integrals
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
Potential
for development
106
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Analysis and Linear Algebra for Finance: Part I Matrices
107
Analysis and Linear Algebra for Finance: Part I Matrices
108
Analysis and Linear Algebra for Finance: Part I Matrices
109
Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
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Analysis and Linear Algebra for Finance: Part I Matrices
www.sylvania.com
We do not reinvent
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cooperation with other specialists and contribute to
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119
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Analysis and Linear Algebra for Finance: Part I Matrices
120
Analysis and Linear Algebra for Finance: Part I Matrices
121
Analysis and Linear Algebra for Finance: Part I Matrices
122
Analysis and Linear Algebra for Finance: Part I Matrices
123
Analysis and Linear Algebra for Finance: Part I Index
Index
right, 63
second-order, 68
bijection, 22 exterior, 30
bound
infimum, 28 frontier, 30
lower, 27, 49 function, 44
supremum, 28 affine, 44
upper, 27, 49 bounded, 49
boundary, 30 compound, 67
concave, 61
cardinality, 9 continuous, 55
closure, 30 convex, 61
compact, 31 decreasing, 46
complement, 32 derivative, 62
Consol bond, 36 differentiable, 62
domain, 44
derivative, 62 even, 45
higher order, 68 increasing, 46
left, 63 left-continuous, 56
CHALLENGING PERSPECTIVES
Internship opportunities
EADS unites a leading aircraft manufacturer, the world’s largest learning and development opportunities, and all the support you need,
helicopter supplier, a global leader in space programmes and a you will tackle interesting challenges on state-of-the-art products.
worldwide leader in global security solutions and systems to form
Europe’s largest defence and aerospace group. More than We welcome more than 5,000 interns every year across
140,000 people work at Airbus, Astrium, Cassidian and Eurocopter, disciplines ranging from engineering, IT, procurement and
in 90 locations globally, to deliver some of the industry’s most finance, to strategy, customer support, marketing and sales.
exciting projects.
Positions are available in France, Germany, Spain and the UK.
An EADS internship offers the chance to use your theoretical
knowledge and apply it first-hand to real situations and assignments To find out more and apply, visit www.jobs.eads.com. You can also
during your studies. Given a high level of responsibility, plenty of find out more on our EADS Careers Facebook page.
124
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Analysis and Linear Algebra for Finance: Part I Index
125
Analysis and Linear Algebra for Finance: Part I Index
.
empty, 10 homogeneous, 117
exterior, 30 impossible, 117
frontier, 30
inclusion, 11
thinking
indeterminate, 117
square, 117
interior, 29, 30
intersection, 12 Taylor
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thinking .
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expansion, 79
formula, 78
Mac-Laurin, 78
union, 12
variable
dependent, 44
independent, 44
127