Probabilistic modelling approach in Quantitative Finance
Explain the Probabilistic modelling approach in Quantitative Finance.
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Probabilistic: One of the main assumptions about the financial markets, at least so far as quantitative finance goes; those asset prices are random. We tend to think of explaining financial variables as following several random paths, along with parameters explaining the growth of the asset and degree of asset of randomness.
We efficiently model the asset path via a given rate of growth, on average and its deviation from such average. It approach to modelling has had the greatest influence over the last 30 years, leading to the explosive development of the derivatives markets.
Elaborate the statement: Coefficient of variation is a better risk calculator to use than the standard deviation when estimating the risk of capital budgeting projects.
What is Value at Risk?
Assume you are a euro-based investor who just sold Microsoft shares which you had bought six months ago. You had invested 10,000 euros to purchase Microsoft shares for $120 per share; the exchange rate was $1.15 per euro. You sold the stock for $135 per share
What is GATT and what is its goal?
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We focus more on cash flows rather than profits when estimating proposed capital budgeting projects. Explain.
Explain financial markets and why do they exist?
What is dynamically hedge?
How is quantity of model risk dependency on vega hedge?
Explain the second way of calibration if we can’t measure that parameter.
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