Financial contract value

My bank sells this contract:

If Apple, Coca-Cola, Volkswagen or H&M dont fall more than 50% over the next 3 years i get a return of 35%. 32.4% including commissions.

(Its between the start on 25 June 2012 and end on 25 June 2015. The fall between these two dates should have to be no more than 50%)

If any one of them fall by more than 50% i get my investment reduced by how much the worst stock has fallen.

I tried to calculate the value of such a contract based on historical prices from 1 Jan 1994.

*****************************'

clear

Tot=0;

n=4655-755; % Number of 3-year periods

T1=0; % Number of these which yields a positive return

T2=0; % Number of these which yields a negative return

 fid  = fopen( 'AppHist2.csv', 'r' );   % Read Apple data
    str  = fread( fid, '*char' );
    sts  = fclose( fid );
    str( str == '"' ) = [];
    cac  = textscan( str, '%f' );

AppH = cell2mat(cac);

for i=1:4655

    AppHO(i)=AppH(4656-i);

end

 fid2  = fopen( 'CoHist.csv', 'r' );    % Read Coca-Cola data
    str2  = fread( fid2, '*char' );
    sts2  = fclose( fid2 );
    str2( str2 == '"' ) = [];
    cac2  = textscan( str2, '%f' );

CoH = cell2mat(cac2);

for i=1:4655

    CoHO(i)=CoH(4656-i);

end

fid3 = fopen( 'VwHist4.csv', 'r' ); % Read Volkswagen data

    str3  = fread( fid3, '*char' );

    sts3  = fclose( fid3 );

    str3( str3 == '"' ) = [];

    str3( str3 == ',' ) = '.'; 

    cac3  = textscan( str3, '%f' );

VwH = cell2mat(cac3);

for i=1:3416

    VwHO(i)=VwH(3417-i);

end

fid4 = fopen( 'HMhist.csv', 'r' ); % Read HM data

    str4  = fread( fid4, '*char' );

    sts4  = fclose( fid4 );

    str4( str4 == '"' ) = [];

    str4( str4 == ',' ) = '.'; 

    cac4  = textscan( str4, '%f' );

HmH = cell2mat(cac4);

for i=1:4628

    HmHO(i)=HmH(4629-i);

end

P3=1; P4=1;

for i=1:n

% run through the data from 1 jan 1994

    K=AppHO(i+755)-AppHO(i);                
    P=K/AppHO(i);
% Apple. Change in % between two points separated by 3 years.

    K2=CoHO(i+755)-CoHO(i);                  
    P2=K2/CoHO(i);
% Coca-Cola. Change in % between two points separated by 3 years.

    if i>1239                                % less data for VW.

        j=i-1239;

        K3=VwHO(j+755)-VwHO(j);             
        P3=K3/VwHO(j);
 % VW. Change in % between two points separated by 3 years.

    end

    if i>27                                                            
% 27 data points less for HM.

        k=i-27;

        K4=HmHO(k+755)-HmHO(k);              
        P4=K4/HmHO(k);
% HM. Change in % between two points separated by 3 years.

    end

if  (P>=-0.5)&(P2>=-0.5)&(P3>=-0.5)&(P4>=-0.5)  
      T=9800*1.35;                               
% 35% return if none of the four stocks have fallen more than 50%
% Contract size is 10000 - 200 in commision.
      T1 = T1+1;                                 

    else

        S=[P P2 P3 P4]
        Smin=min(S)

        T=9800+9800*Smin                                
% If any stock have fallen by more than 50% my investment is reduced by how much the worst stock has fallen.
        T2 = T2+1;

    end

    end

    T;

    Tot = Tot + T;

end

OutcomePerContract=Tot/n

Return=(OutcomePerContract-10000)/10000

NumberPosDays=T1

NumberNegDays=T2

*************************************

OutcomePerContract =

   1.1801e+04

Return =

    0.1801

NumberPosDays =

        3311

NumberNegDays =

   589

***********************************************

If anyone has any ideas on how this can be improved (mathematically or the code. Ofc the data is a problem but that was the best i could do. ) or if there is any errors, I am happy to hear about it.

Answer 1

[Geoff]

Just a snippet of coding advice from me...

If you need to use a number more than once, especially if it relates to how many values you have, etc, DON'T put it in as a literal constant. This includes numbers that are derived mathematically from others... Like 3416, 4628, 755, 1239. What are they? What if you need to change 4665 to something else? How does that change your other numbers? How can you make all the changes without missing something and breaking your code? Put these values into variables with meaningful names and use them consistently.

Here's another small MatLab thing that can help make your code clearer.... You have:

if (P>=-0.5)&(P2>=-0.5)&(P3>=-0.5)&(P4>=-0.5)

I have to read the whole thing carefully before realising that the meaning is:

if all( [P,P2,P3,P4] >= -0.5 )

Consider that syntax if you're not concerned about exploiting logic shortcutting.