"Prediction is very difficult, especially if it's about the future." - Niels Bohr
This video builds on the overwhelming popularity of our first video on using linear algebra to structure bond deals in public finance and lays out a technique for applying a basic optimzation algorithm to simultaneously size and amortize a $100 million municipal bond deal, from 10 years out to 3,000 (just for fun).
"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
Topics: public finance, debt structuring, bond sizing, linear algebra
We are honored this week to have a guest post from Win Smith, author of the The Well-Tempered Spreadsheet. Win is the president of Win Analytics LLC, an independent research and advisory firm.
Debt service charts in public finance are as ubiquitous as business cards at a shortlist presentation and date back to before Lotus 123 offered WYSIWYG. Unfortunately, they usually don’t look much different despite just a few improvements in technology over the last 20+ years. But what can you do to make a principal and interest graph sizzle? The answer is *a bunch of stuff* particularly with Excel 2007's new graphics engine. One rule of thumb (and pet peeve of ours): do not ever make your chart in more dimensions than the data. Debt service is expressed as amount vs time – two dimensions, not three. Three dimensional bar charts, pie charts, etc. just distort the data you're trying to accurately convey. For more details on this, and definitely if you're not already familiar, read from the master of data visualization, Professor Edward Tufte. But back to debt service…
