Explain the econometric models
Explain the econometric models.
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There is one slight problem along with these econometric models, still. The econometrician develops his volatility models in discrete time, while the option-pricing quant would ideally as a continuous-time stochastic differential equation model. Luckily, in many cases the discrete-time model can be reinterpreted like a continuous-time model (where weak convergence as like the time step gets smaller), and therefore both the econometrician and the quant are happy. Even, of course, the econometric models, being based upon real stock price data, result in a model for the real and not the risk-neutral volatility process. For going from one to the other needs knowledge of the market price of volatility risk.
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In brief define each of the major types of international bond market instruments, noting their distinguishing characteristics.The major kind of international bond instruments & their distinguishing characteristics are as follows:
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Your firm have just issued five year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%. Describe the amount of first coupon payment your firm will pay per U.S. $1,000 of face value, if six-month LIBOR is at present 7.2%?Solution:
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Explain stochastic volatility.
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