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Numerical Components for the Finance Industry

NAG’s extensive mathematic and statistical software can help bring quicker solutions in many areas in the Finance Industry including:

Portfolio-modeling and Index-tracking

The NAG optimization routines are ideal for use in portfolio-modeling and index-tracking. The large number of specialized optimization routines include a sparse non linear optimizer. This enables you to optimize portfolios containing a large number of different assets, using more complicated models than the standard Markowitz model. A sparse optimizer is much more appropriate when the models are large, since it takes advantage of the sparsity of the problem and therefore uses less memory and results in faster performance.

NAG’s wide range of statistical routines may also be used to build a competitive portfolio: NAG has routines to build variance-coveriance matrices from raw data. Cluster analysis routines enable stocks to be grouped according to prescribed criteria. From the resulting clusters, individual stocks may be selected to represent the group in a balanced portfolio. Time series routines indicate and predict trends.

Derivative Pricing

NAG has a variety of routines that can assist in derivative pricing. Firstly we have a PDE area that contains routines to solve parabolic and convection-diffusion problems. We even have some specific Black-Scholes solvers.

From the statistical areas we can point to the GARCH routines which enable modelers to assess historical volatility and predict future volatility more accurately. The extensive suite of pseudo and quasi-random number generators are invaluable for Monte Carlo simulations.

The curve and surface-fitting areas are widely used to smooth surface data; this is often helpful in developing financial models.

Visualization

Visualization enables portfolio managers to interpret and make decisions more quickly by looking at the representation of their large datasets in multi-dimensional graphical format, rather than by looking at the numbers themselves. NAG’s visualization software IRIS Explorer provides you with the ability to identify trends instantly, predict market improvements more reliably and analyze complex multi-dimensional data.

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