Explain concept of company debt associated to strike price
Who introduced the concept of company’s debt associated to the strike price and the maturity of the debt?
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1974 Merton, again In 1974 Robert Merton introduced the idea of modelling the value of a company as a call option on its assets, along with the company’s debt being associated to the strike price and the maturity of the debt being the options expiration.
You need to price a fixed-income contract by using the BGM model. Which numerical method should you use?
Explain functional form of coefficients in Monte Carlo method.
Illustrates an example of measure of risk aversion?
How can we use real probabilities for pricing derivatives?
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What did you meant by the Value of a Contract? Answer: Value usually implies the theoretical cost of building up a new contract by simpler products, such as replicat
How was a Monte Carlo simulation in finance assured?
Assume that you inherited some money. A friend of yours is working as an unpaid intern at a local brokerage firm, and her boss is selling securities that call for 4 payments of $50 (1 payment at the end of each of the next 4 years) plus an extra payment of $1,000 at the end of Year 4. Your friend sa
Presently, the spot exchange rate is $1.50/£ and the three-month forward exchange rate is $1.52/£. The interest rate of three month is equal to 8.0% per annum in the U.S. & 5.8% per annum in the U.K. One can borrow as much as $1,500,000 o
What are the characteristics of calibration?
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