Explain the econometric models
Explain the econometric models.
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There is one slight problem along with these econometric models, still. The econometrician develops his volatility models in discrete time, while the option-pricing quant would ideally as a continuous-time stochastic differential equation model. Luckily, in many cases the discrete-time model can be reinterpreted like a continuous-time model (where weak convergence as like the time step gets smaller), and therefore both the econometrician and the quant are happy. Even, of course, the econometric models, being based upon real stock price data, result in a model for the real and not the risk-neutral volatility process. For going from one to the other needs knowledge of the market price of volatility risk.
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What is excess return?
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Illustrates an example of distribution of maxima and minima in Extreme Value Theory?
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Suppose spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. Estimate the minimum price which a six-month American call option along with a striking price of $0.6800 must sell for in a rational market? Suppose the annualized six-month Eurod
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