Conditions for deterministic stock price path equity option
Explain the conditions for assuming a deterministic stock price path for an equity option.
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We have to impose several conditions upon the function r(t).• Forward rates must be positive, or here will be arbitrage opportunities.• Forward rates must be continuous (however this is commonsense rather than due to any financial argument).• Perhaps the curve must also be smooth.
A corporation can have too much working capital. Explain. Explain how can a firm estimate the optimal level of current assets.
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Explain statistical modelling way of determine the model.
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You need to price a fixed-income contract by using the BGM model. Which numerical method should you use?
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