Linear Systems

Document Type

Book Chapter

Publication Title

Indian Statistical Institute Series

Abstract

Many problems of computational finance, such as pricing of an asset, can be formulated as a system of linear equations. Hence, solving the system of linear equations is important in computational finance. An investor would like to assess if the price of a stock is less than its expected level. If the investor sees the stock is already overpriced, then the chance that it will appreciate further will be less and the investor would like to sell the stock. Other investors would also like to sell the stock as they also have the same public information. The stock will fall back to its expected level. On the contrary, if the stock is underpriced, then many investors would like to buy the stock with the assumption that the price will rise to its expected level.

First Page

257

Last Page

278

DOI

10.1007/978-981-19-2008-0_17

Publication Date

1-1-2023

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