Explain finite-difference method in finance
Explain finite-difference method in finance.
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Financial problems starting from stochastic differential equations as models for quantities developing randomly, like equity prices or interest rates, are using the language of calculus. We refer, in calculus to gradients, slopes, rates of change and sensitivities. Such mathematical ‘derivatives’ explain how fast a dependent variable, changes as one of the independent variables, as an option value, as an equity price and changes. These sensitivities are technically explained as the ratio of the infinitesimal change in the dependent variable to the infinitesimal change into the independent.
And we need an infinite number of such infinitesimals to explain an entire curve. Nonetheless, when trying to compute these slopes numerically, on a computer, for illustration, we cannot deal along with infinites and infinitesimals, and have to resort to estimates.
When was quantitative finance the domain of either economists or applied mathematicians?
State the term dispersion trading?
How is Information Ratio calculated?
Mr. James K. Silber, an avid international investor, only sold a share of Rhone-Poulenc, a French firm, for FF50. The share was bought for FF42 year ago. Now the exchange rate is FF5.80 per U.S. dollar and was FF6.65 per dollar a year ago. Mr. Silber attained
Explain in brief the depreciation expense as it comes on the income statement. How can depreciation affect the flow of cash?
Give an example of closed form solution?
Explain number of dimensions in Monte Carlo method.
Explain risk in various forms.
How is a portfolio optimized for the greatest expected return in a prescribed risk level?
Explain Weak-form deficiency in Efficient Markets Hypothesis.
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