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.
How is estimate of volatility or the implied volatility used?
Briefly define the Terms Corporation, partnership and proprietorship.
Your firm have just issued five year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%. Describe the amount of first coupon payment your firm will pay per U.S. $1,000 of face value, if six-month LIBOR is at present 7.2%?Solution:
How is the implied volatility calculated?
Assess a home country's multinational corporations as tool for international diversification.In spite of the fact that MNCs have operations worldwide, their stock prices act very much like purely domestic firms. It is puzzling yet undeniable. Co
How are normal distributions with mean and standard deviation in a given period shown?
What is an option price?
What is an LBO (leveraged buyout)? Explain the risks and the potential rewards for the equity investors.
Is volatility constant?
How does AR (accounts receivable) factoring work? What are the risks and benefits to the two parties involved?
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