Foundations of Computational Finance with MATLAB

CHAPTER 2Working with Dates and Times

2.1 Introduction

Using dates correctly is a critical task because many financial calculations require accurate dating. This chapter reviews methods in MATLAB® for handling, converting, and calculating with dates.

Key concepts introduced in this chapter include:

• The importance of accurate dates and times in finance
• How MATLAB works with dates and times

Software required for this chapter: MATLAB base program; MATLAB Financial Toolbox™.

2.2 Finance Background: Why Dates and Times Matter

Imagine that you're working in the treasury department of a large company that has just raised $3 billion through a bond sale. A $3 billion bond sold with a 3.5 percent yield incurs an annual interest expense of $105 million. Using a 365-day calendar year, each day's interest expense is $287,671, so accurate date counts to ensure timely interest calculations, payments, and cash flow management are essential. The largest corporate bond sales have exceeded $10 billion so the daily interest expense can approach or exceed $1 million.

Accurate tracking is also important for time-stamped transactions, such as order-processing sequences for trades on securities markets. These markets take time seriously: In April 2016, the Department of Homeland Security and the New York Stock Exchange announced the successful test of a timing information system that was within 30 nanoseconds—that's 30 billionths of a second—of the Coordinated Universal Time (UTC) reference time. ...