Illustrates an example of jump-diffusion model
Illustrates an example of jump-diffusion model?
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A stock follows the lognormal random walk. In each month you roll a dice. As you roll a one so the stock price jumps discontinuously. The size of its jump is decided through a random number you draw from a hat. It is not a great illustration as the Poisson process is a continuous process, not a quarterly event.
You need to price a fixed-income contract by using the BGM model. Which numerical method should you use?
Explain boundary/final conditions in Monte Carlo method.
A stock whose value is now $44.75 is growing on average by 15 percent per annum. Its volatility is 22 percent. The interest rate is 4 percent. You need to value a call option along with a strike of $45, expiring in two months’ time. So, what can you do?
What is Rho for the foreign exchange option value?
What is actual volatility? Answer: Actual volatility is the σ that goes in the Black–Scholes partial differential equation.
Explain in brief the accumulated depreciation?
Can a company have a default rate on its accounts receivable that is very low?
Suppose spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. Estimate the minimum price which a six-month American put option along with a striking price of $0.6800 must sell for in a rational market? Suppose the annualized six-month Eurodo
Explain some examples of mutually exclusive projects.
Financing costs included into the capital budgeting analysis process. Explain.
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