VIDEO: Linear Algebra of Public Finance Debt Sizing

Posted by Peter Orr on Mar 13, 2013

"If people do not believe that mathematics is simple, it is only because they do not realize how complicated life is."  - John Louis von Neumann 

Many masters of the universe IB types think public finance is akin to Michael Lewis’ (in)famous "equities in Dallas" assignment offered to the lower tier analysts post training.  But that perception is largely because they don't know that some of the peculiarities that make munis munis also make it interesting, unique, and frankly more quantitatively challenging then corporate finance. 

This video from our Resources page introduces linear algebra (via MATLAB) as an integral part of understanding what’s really going on when sizing and structuring public finance bond deals. We quickly explain (perhaps review) a few basic concepts in linear algebra and then plunge headlong into sizing a simple 3 bond example using linear algebra and the canonical system of equations expressed by Ax=b. 

As this our first entry in the “propeller head” category of resources, we’d love to hear your thoughts!