Explain exotic or over-the-counter contracts
Explain exotic or over-the-counter (OTC) contracts.
Expert
These are not traded actively; they may be unique to you and your counterparty. These instruments need to be marked to model. And this clearly raises the question of that model to use. Generally in this context the ‘model’ implies the volatility, whether in FX or fixed income and equity markets.
How is risk and return related to the market as a whole? Give an example.
You need to price an option that is paid for within instalments, and you can stop paying and lose the option. Which numerical method should you use?
How is GARCH determined?
State the term dispersion trading?
Explain the tool of Series solutions in Quantitative Finance.
What is GATT and what is its goal?
When is the close relationship breaks-down in hedging reasons?
Illustrates an example of distribution of individual numbers or random numbers.
Illustrates the way to optimize hedge.
What are possible ways of marking exotic or over-the-counter contracts?
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