Explain the uncertain volatility
Explain the uncertain volatility.
Expert
Uncertain volatility: The unseen volatility is an elegant solution for the problem of modelling it is also called uncertain, meaning that this is allowed to lie in a given range but whereabouts in which range it in fact is, or indeed probability of being at any value, which are left unspecified. With such type of model we no longer determine a single option price, but a range of prices, showing best-case scenario and worst-case scenario.
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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 40% Firm is proposing to buy the new plant that could generate extra annual profit of Rs. 10,000. The fixed cost of new plant is e
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