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单词 EquitableMatrixForMoneyExchange
释义

equitable matrix for money exchange


This example shows how equitable matrices arise in money exchange.Consider n currencies C1,C2,,Cn, where Ci stays for somename like “dollar”, “euro”, “pound”, etc. Denote the exchange ratebetween currencies Ci and Cj as aij>0, i.e.

1CiaijCj.(1)

We will call A=(aij)i,j=1n an exchange rates matrix.Suppose, A is anequitable matrix, i.e.

aij=aikakj,i,j,k=1,,n.(2)

Let us discuss consequences of this. First of all, there is no loss when exchangingbetween two currencies: if one exchanges u units of Ci to Cjand then back to Ci, one will have again u units. Indeed,

uCiuaijCju(aijaji)Ci

and desired conjecture follows from the fact that

aijaji=1,i,j=1,,n,(3)

which can be proven by putting j=i in (2) and using diagonal property(aii=1, for all i=1,,n).But equitable property (2) suggests in fact more than just (3), i.e. morethan just no loss by changing from one currency to another and back. For illustration consideran example.

Example 1.

Let us take three currencies C1, C2, C3 with the following exchange rates

1C12C2,
1C13C3,
1C22C3.

The above relationsMathworldPlanetmath define a12,a13,a23 in the exchange rates matrix A.Let us define other elements by (3). This gives us

A=(1231/2121/31/21).

Now assume one has 100 C3 units and wants to exchange them to C1. If one does thisdirectly, one will obtain 300 C1 units. But if one exchanges first to C2 and thento C1, one will obtain 400 C1 units.

For an equitable exchange rates matrix the above described situation is impossible:exchanging uCi units to Cj is the same as first exchanging to Ck and thento Cj. Indeed,

uCiuaijCjuCiuaikCku(aikakj)Cj

and the final result is the same due to the equitable property (2). Note, that the matrixfrom the example is not equitable

a23a21a13.

The above consideration shows that equitable property does not allow making moneyjust by exchanging currencies. If (2) does not hold for someindexes, for example

aij<aikakj,

then having uCi units one can make money just by exchanging them to Cjthrough Ck and back

uCiuaikCku(aikakj)Cju(aikakjaij)Ci.

If we denote q:=aikakjaij>1, then after making N suchexchanges instead of u one would have uqN units — the capital wouldincrease like geometric progression! If there is an opposite inequality

aij>aikakj,

then such advantage have those with Cj currency. So, condition (2) guaranteesthat no one can speculate on currency exchange, thus motivating the name“equitable” — “to be fair”.

Let us give an interpretationMathworldPlanetmathPlanetmath of the matrix-vector multiplication for exchange rates matrices.This interpretation is not connected with the equitable property (2) and showswhy exchange rates matrices are useful in general.

Consider a company which operates on the international market (e.g., a company which makesfurniture/cars/household equipment/etc, and sells their products to more than one country) and, thus, obtainsmoney in different currencies C1,C2,,Cn. From time to time,for such a company the natural question arises: what is thetotal amount of money we have? Specifically, at a given time the company obtainedthe following money: u1C1,u2C2,,unCn. With given exchange ratesaij, the total amount of money in the currency Ci isj=1nujaji.That’s why we have

if matrix A is the exchange rates matrix for currencies C1,,Cn,u=(u1,,un) is a row-vector with componentsPlanetmathPlanetmath expressing amount of units in each currency,then components of the vector uA express the total amount of money in each currency.

The following example gives illustration to this.

Example 2.

Imagine a company located in Germany, let’s call it “Peaut”, which makes auto “Leoptera”.It sells this auto to five different countries: Germany (its home country), USA, United Kingdom,Japan, and Switzerland. Thus, it needs to operate with the following currencies:

C1=“euro”=“EUR”,
C2=“USA dollar”=“USD”,
C3=“British pound”=“GBP”,
C4=“Yapanese yen”=“JPY”,
C5=“Swiss frank”=“CHF”.

The corresponding exchange rates matrix A is presented in Table 1.The values were first collected from\\htmladdnormallinkWikipediahttp://en.wikipedia.org/at the middle of 2005, and then they were modified such that the resulting matrix is equitable.

EUR

USD

GBP

JPY

CHF

EUR

1

1.25

0.625

125

1.5626

USD

0.8

1

0.5

100

1.25

GBP

1.6

2

1

200

2.5

JPY

0.008

0.01

0.005

1

0.0125

CHF

0.64

0.8

0.4

80

1

Table 1: Exchange rate matrix used in the example.

The price of “Leoptera” in each country, number of sold cars during a year, andcorresponding amount of money are gathered in Table 2. The last column givescomponents of the row-vector u in our example. To answer the question what is the totalamount of money are obtained by “Peaut”, one needs to computeuA. The result is presented in Table 3.

Country where the cars were sold

Price for one car

Amount of

sold cars

(in thousands)

Obtained money

(in milliards)

Germany

21.000 EUR

100

2.1 EUR

USA

32.000 USD

35

1.12 USD

UK

14.000 GBP

40

0.56 GBP

Japan

3.1 mln JPY

8

24.8 JPY

Switzerland

34.000 CHF

5

0.17 CHF

Table 2: Statistic of selling “Leoptera” during a year.

Country’s currency

The total amount of money in different currencies

(in milliards)

EUR

4.1992

USD

5.249

GBP

2.6245

JPY

524.9

CHF

6.56146

Table 3: Total amount of money obtained by “Peaut”.
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