All Questions
145
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30
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Finding duration of given payment
Question :A corporation bond with annual coupon rate 7,5% will mature at 30 june 2025.Find duration of the bond on 31 december 2023 given that the annual interest rate is 5,5%.Assume the par value is ...
- 135
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1
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29
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A concrete example with Arrow-Pratt coefficient of absolute risk aversion
Let $u_1$ and $g$ be increasing strictly concave functions from $\mathbb{R}$ to $\mathbb{R}$. Let $u_2:=g\circ u_1$. If we regard $u_1$ and $u_2$ as utility functions of two players, this is saying ...
- 667
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33
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Approximating the half-life of a shock to a system?
I found the following statement in here regarding the effect of twice lagged differences of CO2 ($\Delta C$) in the atmosphere on the once lagged values, i.e.
$$\Delta C_{\text{ @ }t=-1}= 0.83 \times ...
- 609
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10
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Dummy variable with multiple criteria - how to
Dummy variable is simple when it is true or false.
What happens if the 'true' has multiple criteria that needs to be met?
For example, there are 4 criteria in total. And 3 out of 4 must be true for ...
- 1
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24
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Estimating Present Bond Value without YTM using yield curve rates
Suppose I have a bond where I know the par value, coupon rate, and maturity date as well as the daily Yield Curve Rates given here
How can I go about estimating the ytm needed to determine the present ...
- 21
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143
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Minimum Variance, Tangency Portfolio, and Efficient Frontier
There are 3 assets $S_1$, $S_2$ and $S_3$. $S_1$ has a mean return of $0.17$ and standard deviation of $0.2$, $S_2$ has a mean return of $0.13$ and standard deviation of $0.4$ and $S_3$ has a mean ...
- 189
2
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204
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Prices in a lottery with given utility problem
Suppose a person has a Bernoulli utility function $u(\cdot)$ and an initial wealth $w_0$. A lottery $L$ offers a payoff $A$ with probability $p$ and payoff $B$ with probability $q$, where $q = 1-p$. ...
- 1,271
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42
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Find nth term of series with both addition and multiplication
If I have a series that replicates the effect of saving with compounding interest in an economic environment with combating inflation such as:
$$a_{yr} = a_{yr-1}*I_n+N*I_F^{yr-1}$$
Where $yr$ is the ...
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16
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Conversion of Williams Percentage values to Stochastic range values
This may appear redundant to some, as well as if this has been done before - please direct me to where this may be found. However I am attempting to create a specific type of indicator for trading ...
3
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1
answer
43
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Determine all values $\lambda$ for which $\mu \succ 0 \succ \upsilon$
Suppose an investor has a preference represented by the relation $\succ$ for which there is a von-Neumann Morgenstern representation with the utility function $u$: $$u(x)=\begin{cases} x & x\ge 0 \...
- 307
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25
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A put option and a call option with identical exercise price are both marketable or neither is.
I am doing Exercise 1.13 in Introduction to Mathematical Finance: Discrete Time Models by Pliska.
Exercise 1.13 Suppose the interest rate $r$ is a scalar, and let $c$ and $p$ denote the prices of a ...
- 655
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1
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58
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Taylor Expansion for the Return averaged over k periods? [closed]
this is my first question here. I need help to understand the Taylor Expansion which gives the (2.2.5) equation (see the pictures). Thanks
(pictures from: Schmidt - Quantitative Finance for Physicists....
- 11
1
vote
1
answer
66
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Regression relation to casual relationship
If the correlation coefficient of two variables is 0, can there still be a causal effect between them? And can the causal relationship between these two variables be studied by regression analysis?
- 57
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400
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Prove that the stochastic process $s_t$ follows a normal distribution where the mean and the variance are functions of time in each case.
The two basic models of finance are the following:
$\textbf{The Samuelson SDE (aka Black - Scholes - Merton model):}$ Suppose that $Z=\left(Z_t, t\in\mathbb{R}^{+}\right)$ is a Wiener process (aka ...
- 257
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1
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41
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Most Efficient Way Saving Money (Compound Interest)
If I have four children and I want to ensure each have £8,500 come there 18th birthday, assuming that I put money in each month, and gain 10% interest per year (taking into account compound interest). ...
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