Illustrates an example of binomial model as complete market
Illustrates an example of binomial model as complete market?
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Consider, for illustration, the binomial model in that there are two states of the world at the next time step, and here are also two securities as cash and the stock. It is a complete market. Then, after two time steps here will be three possible states of the world, to assume the binomial model recombines therefore an up–down move gets you to similar place as down–up. Therefore you might think as you require three securities for a complete market. This is not the case because after the first time step you get to change the quantity of stock you are holding; it is where the dynamic part of the replication combines.
Explain all the model and experiments of Robert Merton.
Illustrates an example of delta hedging.
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Explain in detail stock dividends and stock splits affect the common stock’s market price. Also explain why a firm declares stock dividends and stock splits?
Otobai Motor Company is currently paying a dividend of $1.40 per year. The dividends are expected to grow at a rate of 18% for the next three years and then a constant rate of 5% thereafter forever. What is the vlaue of its current stock price? Assuming that the discount rate is 10%.{Hint: pages 84-
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Give an example of different types of mathematics found in Quantitative Finance?
describe the operational benefits of jit system
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