Probabilities and statistics for quantifying risk in finance
Explain probabilities and statistics for quantifying risk in finance.
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In finance we tend to concentrate on risk along with probabilities we calculate, we then have all the tools of probability and statistics for quantifying various aspects of such risk. In some financial models we do attempt to address the uncertain. For illustration, the uncertain volatility work of Avellaneda et al in 1995.
What is implied volatility? Answer: Implied volatility is number into the Black–Scholes formula which makes a theoretical price equal a market price.
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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?
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What is Speed in option value?
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