Problems with real probabilities to price derivatives
What are the main problems with real probabilities to price derivatives?
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Two main problems are there with it.1. You need to be capable to measure real probabilities. 2. You need to decide on a measure of risk aversion or a utility function.
The discussion of zero-coupon bonds in the text gave an instance of two zero-coupon bonds issued through Commerzbank. The DM300, 000,000 issues due in the year of 1995 sold at 50 percent of face value and the DM300, 000,000 due in the year of 2000 sold a
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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 put option along with a striking price of $0.6800 must sell for in a rational market? Suppose the annualized six-month Eurodo
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Define the stochastic differential equation with an expression?
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Compare & contrast the several types of secondary market trading structures. There are two fundamental types of secondary market trading structures: dealer & agency. In a dealer market, the dealer serves as market maker for the securit
How is the risk into portfolio measured in Crash Metrics?
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