Explain the first method of calibration
Explain the first way of calibration if we can’t measure that parameter.
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Let’s see the first process in action. Examine, possibly, equity data to try to calculate what volatility is. The problem along with it is that this is necessarily backward looking, by using data from the past. It might not be relevant to the future. The other problem with it is that it might give prices which are inconsistent with the market. For illustration, you are interested in buying a certain option. But you think volatility is 27%, therefore you use that number to price the option and the price you determine is $15. Although, the market price of that option is $19. You can either choose that the option is incorrectly priced or which your volatility estimate is wrong.
Explain the term Value at Risk.
Why is dispersion trading become successful?
When you add random numbers and get normal, what occurs when you multiply them?
You are an investment banker advising a Eurobank regarding a new international bond offering it is considering. The proceeds are to be utilized to fund Eurodollar loans to bank clients. What sort of bond instrument would you suggested that the bank consi
Why would it be useful to inspect a country's balance of payments data?It would be useful to inspect a country's BOP for at least two reasons. Firstly, BOP provides detailed information regarding the supply & demand of the country's currency
How we get conservative estimate of the whole risk with a coherent measure of risk?
what happens to company when additional fund is not required?
Example of Forward and Backward Equations.
Grecian Tile Manufacturing of Athens, Georgia borrows $1,500,000 at LIBOR and a lending margin of 1.25 percent per annum on six-month rollover basis through London bank. If six-month LIBOR is 4 ½ percent in the first six-month interval and 5 3/8 percent over the second six-mo
From books of Aggarwal Bors, following information has been extracted: Rs. Sales 2,40,000 Variable costs 1,44,000 Fixed costs 26,000 Profit before tax 70,000 Rate of tax
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