Discrete/Continuous modelling approach-Quantitative Finance
Explain the Discrete/Continuous modelling approach in Quantitative Finance.
Expert
Discrete/Continuous: Whether deterministic or probabilistic, the eventual model you note down can be continuous or discrete. Discrete implies that asset prices and/or time can only be incremented in finite chunks, whether a cent or a dollar, a day or year. Continuous implies that no such lower increment exists. The continuous mathematics processes is frequently easier than that of discrete ones. But when this comes to number crunching you have in any case to turn a continuous model in a discrete one.
In discrete models we end up along with difference equations. For option pricing an illustration of this is the binomial model. Time progresses in finite amounts, the time step. In continuous models we finish up with differential equations. The corresponding of the binomial model in discrete space is the Black–Scholes model that has continuous asset price and continuous time. Here binomial or Black–Scholes, both of such models come from the probabilistic assumptions regarding the financial world.
Explain maintenance of future and option margins.
How is Sharpe ratio calculated?
What are a bank's primary reserves? When the Fed sets reserve requirements, what is its primary goal?
Explain the tool of Discretization methods in Quantitative Finance.
You are required to submit a bid to supply 200,000,000 widgets per year to the State of Illinois for the next five years. Your company has an idle tract of real estate that cost $1,500,000 ten years ago; if your company sold the land today, it would generate $3,000,000 after the taxes were paid. The
Give an example of dynamic hedging.
What is the weight in the weighted average cost of capital?
Illustrates an example of real probabilities to price derivatives?
Question 1 Four European vanilla Call options Ci ( ⋅) on an underlier with no interim cash flows, have identicalmaturity T . Their strike prices K i are such that K1 < K 2 < K 3 < K 4 and all strikes are equallyspaced. Interest rates are equ
What is Arbitrage Pricing Theory?
18,76,764
1947618 Asked
3,689
Active Tutors
1460773
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!