Explain finite-difference method in finance
Explain finite-difference method in finance.
Expert
Financial problems starting from stochastic differential equations as models for quantities developing randomly, like equity prices or interest rates, are using the language of calculus. We refer, in calculus to gradients, slopes, rates of change and sensitivities. Such mathematical ‘derivatives’ explain how fast a dependent variable, changes as one of the independent variables, as an option value, as an equity price and changes. These sensitivities are technically explained as the ratio of the infinitesimal change in the dependent variable to the infinitesimal change into the independent.
And we need an infinite number of such infinitesimals to explain an entire curve. Nonetheless, when trying to compute these slopes numerically, on a computer, for illustration, we cannot deal along with infinites and infinitesimals, and have to resort to estimates.
Explain the programme of study of finite differences.
If taxable income is 82,900 and filing single, what is tax liability?
State the term Calibration in financial model?
Why cash flows and accounting profits are not considered the same thing.
Explain the experiment of Oldrich Vasicek of short-term interest rate.
Illustrates an example of distribution of maxima and minima in Extreme Value Theory?
Normal 0 false false
Financing costs included into the capital budgeting analysis process. Explain.
Illustrate how the bank can employ a position alternatively in Eurodollar futures contracts to hedge the interest rate risk formed by the maturity mismatch it has with the $3,000,000 six-month Eurodollar deposit & rollover Eurocredit position indexed to th
Elaborate: Accounts receivable are sometimes not collected. What is the reason that companies extend trade credit when they could insist on cash for all sales?
18,76,764
1949924 Asked
3,689
Active Tutors
1438748
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!