Explain the tool of Discretization methods
Explain the tool of Discretization methods in Quantitative Finance.
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Discretization methods: The complement to simulation methods, and there are several types of such. The best identified are the finite-difference methods which are discretizations of continuous models that Black–Scholes. Depending upon the problem you are solving, and unless it’s extremely simple, you will probably descend the simulation or finite-difference routes for your crunching number.
Give an example of worst-case scenarios and uncertainty?
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An optimal capital structure exists, explain the reasons. Why very small amount of debt is as undesirable as is very big amount debt?
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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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