Conditions for deterministic stock price path equity option
Explain the conditions for assuming a deterministic stock price path for an equity option.
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We have to impose several conditions upon the function r(t).• Forward rates must be positive, or here will be arbitrage opportunities.• Forward rates must be continuous (however this is commonsense rather than due to any financial argument).• Perhaps the curve must also be smooth.
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-
Grecian Tile Manufacturing of Athens, Georgia borrows $1,500,000 at LIBOR and a lending margin of 1.25 percent per annum on six-month rollover basis through London bank. If six-month LIBOR is 4 ½ percent in the first six-month interval and 5 3/8 percent over the second six-mo
Financing costs included into the capital budgeting analysis process. Explain.
Explain the term complete market.
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How we get conservative estimate of the whole risk with a coherent measure of risk?
Explain the factors that responsible for the recent surge in international portfolio investment (IPI)?
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