# All Questions

12,447 questions
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### Cross currency swap basis with USD added on the covered interest rate parity (CIP)

We know the adjusted covered interest rate parity (CIP): $$Forward = \dfrac{1+r\cdot\tau+b}{1+r^*\cdot\tau+b^*}Spot$$ Here $r/r^*$ is the risk-free foreign/domestic rate and $b/b^*$ is the cross ...
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### Reducing pricing errors (Alpha) in the CAPM with Bitcoin

I have been trying to examine, using the CAPM, if Bitcoin belongs in the market portfolio or not. With 10 industry portfolios from http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library....
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### Hedging with different volatility (Ahmad and Wilmott paper)

In their paper they show that: - if you hedge with the realised volatility, the present value of the total p&l is the difference between the option value based on the realised volatility and the ...
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### Expected value of exponential of hitting time of GBM

We have a stopping time $$\tau=\inf\{t\geq 0: S_0e^{\sigma B_t+(r-\sigma^2/2)t}=S^* \}$$ where $S_0,\sigma,r,S^*$ are constants and $S^*<S_0$, and $B_t$ is a brownian motion. I wish to compute ...
Consider a derivative of digital type which pays this kind of payoff at time $T$: \begin{align*} g(S_T,k) &= \begin{cases} P_0,~S_T>k \\ S_T, ~S_T\leq k \end{cases} \end{...