Explain marking to market with an example
Explain marking to market with an example.
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A stock is trading at $47, but you think this is seriously undervalued. You believe that the value must be $60. You buy that stock. How much do you say to people your little ‘portfolio’ is worth as $47 or $60? When you say $47 then you marking to market, when you say $60 you are marking to model or your model. Of course this is open to serious abuse and therefore it is usual, and frequently a regulatory need, to quote the mark-to-market value. When you are right about the stock value so then the profit will be realized like the stock price rises.
Explain the term CGARCH as of the GARCH’s family.
Assume you are a euro-based investor who just sold Microsoft shares which you had bought six months ago. You had invested 10,000 euros to purchase Microsoft shares for $120 per share; the exchange rate was $1.15 per euro. You sold the stock for $135 per share
Determine the efficiency of Monte Carlo method.
What will be the effect on riskiness of a portfolio if assets with negative correlations (even very low correlations) are taken together?
What is Vega?
Explain marking to market will put some rationality back in trading.
Explain the difference between mortgage bond and a debenture?
When we can use Finite difference numerical method?
What are a callable bond and a putable bond? How can each of these bonds affect their market interest rates?
Explain an example of finite-difference method.
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