Explain actual volatility with desmond fitzgerald calls
Explain actual volatility with desmond fitzgerald calls.
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Actual volatility is a measure of the amount of randomness in a financial quantity at any point in time. This is Desmond Fitzgerald calls to the ‘bouncy, bouncy.’ This is difficult to measure, and still harder to forecast but this is one of the important inputs in option-pricing models.
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-
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