Stack Exchange Network

Stack Exchange network consists of 174 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
votes
0answers
97 views

An interview question: Swap rates

Calculate the missing par bid and ask swap rates for the following tenors and briefly describe the calculation (assume the simple zero rate is linear interpolated, short-end (<1 years) is simple ...
1
vote
1answer
55 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
77 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
40 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
133 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
35 views

What does the notation $\psi (x_1, x_2, \dots, x_n)$ mean in this context?

I am currently reading a paper titled "The computational hardness of pricing compound options". In this, the following paragraph occurrs: As a warm-up, we will show that pricing a sequence of call ...
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
107 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
149 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 ...
0
votes
0answers
97 views

Calculating Compound Interest on a Leveraged Account

Let's assume I have the following setup in a trading account with the assumed yearly returns: Principal = $25,000 Yearly Return = 20% Account Leverage: 5x Timeframe: 5 Years To solve for the ...
1
vote
1answer
330 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
101 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
73 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 ...