Explain the first method of calibration
Explain the first way of calibration if we can’t measure that parameter.
Expert
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.
Why is dispersion trading become successful?
What is the meaning of statement: earnings available to common stock dividends paid from the current income and common stockholders statement affect the balance sheet item retained earnings.
What is Co-integration?
Assume Morgan Guaranty, Ltd. is quoting swap rates as follows: 7.75 - 8.10 percent annually against six-month dollar LIBOR for dollars and 11.25 - 11.65 percent annually against six-month dollar LIBOR for British pound sterling. At what rates will Morgan Gua
Describe difference between international financial management and domestic financial management?There are three major dimensions which set apart international finance from domestic finance as 1. Foreign exchange & political risks,
How is Gamma hedging more precise form of hedging that theoretically eliminates?
Explain an example of Margin Hedging in Metallgesellschaft and Long Term Capital Management.
Why is traditional, simple VaR measurement not coherent?
What are random factors for risk-neutral drifts?
18,76,764
1948967 Asked
3,689
Active Tutors
1425121
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!