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  • 13 votes cast
Feb
5
comment Which obligation choose
Why wouldn't the highest interest rate and the shortest maturity be the obvious right answer?
Jan
29
comment Black_scholes formula for a butterfly option
The value of a set of options is the sum of the values of the individual options, if that's what you're asking.
Jan
29
comment Determining rate of interest
bondtutor.com/btchp5/topic2/topic2.htm may help. And googling "ZNH6" should show plenty of sites that give frequently updated near-real-time data.
Jan
28
comment School project about Black Scholes with stochastic volatility
Just as a note, real financial instruments display a "volatility smile", which means they aren't consistent with Black-Scholes. Do you want this to be part of your project?
Jan
27
awarded  Autobiographer
Jan
21
comment binomial - parameters at which american option hits early exercise possibility
Wild guess: if the remaining time value of the option is the less than interest rate on the in-money value, exercising early would make sense.
Jan
20
comment Altman Z-Score to Probability of default
I'm not 100% sure what you're trying to do here. According to the WP article on the Altman Z score, it only discriminates companies into three "zones" and doesn't offer an exact probability of bankruptcy. Could you explain where you came up with your formula? Also, since you are comparing two numbers, it would make more sense to plot the probability on the y axis and the Altman Z score on the x axis.
Jan
20
comment proven implementation of Black scholes formula
wolframalpha.com/input/?i=black+scholes (is there a reason you think the above doesn't work? is it giving the wrong answers or does it just not give an answer at all).
Jan
16
comment How to interpret negative log return more than -100%?
The change in the log price is not a percentage, it's a value (pure number). To compute the percentage change, you take e^(change in log value). So, a change of -2.3 in the log price would equate to e^-2.3 which is 0.1 or 10%, so the price change would be a decrease of 90% (which, of course, is what a change from 10 to 1 actually is).
Jan
16
comment Call options and portfolio of the same options worth less?
For the multiple calls, you get to take the sum of the per-component increased values and ignore any decreased values since calls can't be worth less than 0. For the portfolio, you have to take the positive and negative sums and look at the delta for the entire portfolio.
Jan
16
comment Options and bond related to convexity
Quibble with Assumption 2.1: if the payoff is less than the risk-free interest rate, could the price be negative (you'd have to pay someone to take it to make up for the interest they would lose)?
Jan
8
answered Does an implied volatility always exist for a binary option?
Dec
18
comment Sharpe Ratio : why the normalization factor?
en.wikipedia.org/wiki/Sharpe_ratio#Definition may be helpful. Note that you divide by the standard deviation, which is the square root of the variance. Also, standard deviation increases by sqrt(t) over time. I'll try to be more specific if this doesn't help.
Sep
21
comment Exchange rate conversion
Hint: if you discount something's price by 50%, you have to raise the price 100% (of the reduced price) to get it back to the original price. Does that help?
Aug
18
awarded  Nice Question
Apr
6
awarded  Notable Question
Jan
31
awarded  Yearling
Dec
1
comment In which divisions of banking are the Greeks and Black Scholes equation applied?
They're also used to create financial crises in the European Economic Community, but that's a different type of Greek ;)
Dec
1
comment Opposite of hard to borrow?
If "everyone" expects a stock to fall or rise, that will be reflected in the current price. Aggressive buybacks and billionaire pledges would also have an instantaneous effect (assuming you trusted the billionaire)
Dec
1
comment How do I calculate the probability of a stock being above or below a value using the Heston model?
Google, wikipedia and investopedia might be good starting points.