Real World Examples of Singular Matrices in Finance

[calli]

Homework Statement

Hi, no variables, eqns or any of that here:) I was hoping some of you brilliant people could help me in finding some real world examples of where singular matrices occur. I do know that most real world problems yield matrices that are singular and therefore not invertible. We can use a generalized inverse on these problems, but I am finding it difficult to find some real world examples of this, specifically in the field of finance.

Homework Equations

The Attempt at a Solution

 

[SGT]

In real world applications singular matrices occur very seldom, since the elements are real numbers.
What is common is badly conditioned matrices: matrices whose determinant is not zero, but is very close to. In this case, small fluctuations in any parameter yields enormous variations in the result.

 

[calli]

singularity

hey thanks so much.

I have been looking at ill-conditioned matrices. I was hoping to find some specific financial application that yields ill-conditioned matrices. (i.e. there condition number is very large)

 

[SGT]

hey thanks so much.

I have been looking at ill-conditioned matrices. I was hoping to find some specific financial application that yields ill-conditioned matrices. (i.e. there condition number is very large)

What makes a matrix singular or ill-conditioned is the value of the elements. Any application can have those types of matrices, depending on the data.