Stack Exchange Network

Stack Exchange network consists of 175 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

Questions tagged [compounding]

The tag has no usage guidance.

1
vote
0answers
61 views

pricing of futures

When pricing futures with the cost of carry model; When do you use continuous compounding and when do you just use simple compounding? AND WHY? Also, when deriving proof of no arbitrage with the cost ...
1
vote
1answer
62 views

What is, here, the relationship between “compound” and “arithmetic return” and “volatility”?

I'm trying to find the exact (ie, not an approximate) relation between the "Compound Return", "Arithmetic Return", and the "Annualised Volatility" as given the assumptions below, and from there the ...
0
votes
2answers
80 views

Compound 3-year returns to obtain 10-year returns: How to do?

I have 3-year returns at a monthly frequency, snippet below. How to compound the 3-year returns to obtain 10-year returns (since the cumulative product of 3 3-year return would be the 9-year return). ...
0
votes
0answers
45 views

reconciling arithmetic and geometric compounding

I have just been through 4 papers that make all sorts of clever claims about the 'alternate universes' of arithmetic returns and geometric returns, how thr twain shall never meet, and how they are ...
1
vote
0answers
165 views

tenor basis swap spreads and compounding

Let's say I have a 3mv6m tenor basis swap that is quoted at a spread of x bp (and it is a spread on the 3m leg while the 6m leg is the flat leg). Nowadays, I think the convention in most currencies is ...
0
votes
0answers
30 views

What is meant by the term 'unbounded compounding'?

I am currently trying to make sense of a paper by Mark Braverman and Kanika Pasricha titled "The computational hardness of pricing compound options". On page 3 of this paper, it claims that "With ...
2
votes
1answer
123 views

Simple Compounding vs Continuous Compounding in return series

I'm creating a log price series in MATLAB. This is fairly easy to do using standard functions. Given a price series prices: ...
1
vote
1answer
166 views

Characteristics of a Discount Curve

Does the discount curve used for discounting cash flows have to be a zero coupon, annual compounding, actual by actual day basis curve? In practice, does a curve used for discounting necessarily have ...
1
vote
1answer
372 views

From continuous compounding to simple compounding - convexity adjustment

I have derived the convexity adjustment expression for futures rates using the Ho-Lee model, to arrive at the following: $$ ForwardRate = FuturesRate - \frac{1}{2}\sigma^2T_1T_2 $$ where $T_1$ refers ...
1
vote
1answer
109 views

Compound interest calculator solving for time with deposits [closed]

I am attempting to solve a compound interest calculation for time given Principal = 100 Time(years) = t Rate(per year) = 8% Deposit(per month) = 5 Total = 300 I ...
1
vote
1answer
75 views

Price compounding: Swap versus Governments Bonds

There are different rates curve to compound prices. Since the crisis, regulators tends to favor price compounding with swap curves over IR curves deduced from governments bonds (EU regulators, french ...