Explain what is a Monte Carlo method
Explain what is a Monte Carlo method?
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This method simulates the random behaviour underlying the financial models. Therefore, in a sense they find right to the heart of the problem. Always keep in mind that, while pricing you should simulate the risk-neutral random walks, the value of a contract is then the ordinary present value of all cash flows.
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?
How we get conservative estimate of the whole risk with a coherent measure of risk?
Explain the term: annuity. How can continuous compounding benefit an investor?
What is the difference between a Quant and an Actuary? Answer: The answer of this question is difference between an Actuary and a Quant is ‘Lots’. They c
How could MBAs cope?
If the cost benefit of interest rate swaps would probably be arbitraged away in competitive markets, what other explanations present to explain the rapid development of the interest rate swap market?All kinds of debt instruments are not always o
Why cash flows and accounting profits are not considered the same thing.
What are retained earnings? Why are they important?
B. Show how Kareem's WACC would change if the tax rate dropped to 25 percent and the estimated cost of equity capital were based on a risk-free rate of 7 percent, a market risk premium of 8 percent, and a systematic risk measure or beta of 2.0.
Give an example of Model-independent hedging.
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