Explain numerical integration in numerical method
Explain numerical integration in numerical method.
Expert
Infrequently one can write down the solution of an option-pricing problem within form of a numerous integral. It is as you can interpret the option value like an expectation of a payoff, and also an expectation of payoff is mathematically only the integral of the product of which payoff function and a probability density function. It is only possible in particular cases. The option has to be European, the underlying stochastic differential equation should be explicitly integrable (therefore the lognormal random walk is ideal for that) and the payoff shouldn’t generally be path dependent. So when this is possible then pricing is simple... you have a formula. The only complexity comes in turning this formula in a number. And which is the subject of numerical integration or quadrature.
What is the validity of the Efficient-market hypothesis?
Explain the reasons why is quantitative finance in a mess?
What is MCC (marginal cost of capital schedule)? The schedule is always a horizontal line. Elaborate.
Criticize the flexible exchange rate regime from the point of view of the proponents of the fixed exchange rate regime. If exchange rates are randomly fluctuating, that may discourage international trade and suppor
What are the real differences between the partial differential equations?
Why is volatility annualized standard deviation of return?
What is bird in the hand theory of cash dividends?
Describe the sales forecasting process.
A. What per visit price must be set for the service to break even? To earn an annual profit of $100,000
How can financial managers estimate the average tax rate?
18,76,764
1959125 Asked
3,689
Active Tutors
1441577
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!