# Tag Info

1

To me, this looks like a (very?) quick-and-dirty way to compare options' sensitivities for a fixed underlying asset: Disregarding dividends, the Black-Scholes Vega is calculated as $$\mathrm{Vega}\equiv \frac{\partial O }{\partial \sigma}= Sn\left(d_1\right)\sqrt{T}$$ where $d_1=\frac{\ln S-\ln X+(r+0.5\sigma^2)T}{\sigma\sqrt{T}}$, and $T$ is the time to ...

1

Calculating the YTM The yield to maturity (YTM) is often used as a yield measure. The YTM of a bond is defined as the solution of the equation: $$P_d=\sum_{t=1}^T\frac{C_t}{(1+r)^t}$$ Where $P_d$ is the bond's dirty price. When calculating the YTM, you don't have to worry about the reinvestment assumption. For instance, assume that you have a 6 year bond ...

-1

The reinvestement assumption is not required to calculate the IRR, BUT to say some investment gave you $X\%$ equal to IRR rate, it is required that the interim cashflows are reinvested at the IRR rate. For illustration purpose consider this investment: 5 year investment, initial cost = 100, annual positive payments of +5 at the end of each year and the last ...

0

There's no reinvestment assumption when IRR is computed for a series of cash flows. IRR can be found using numeric methods which have no built-in assumptions.

1

The reinvesting-of-interim-cash-flows-at-IRR (RICFI) assumption is neither required for nor has any impact on the calculation of IRR of a project, or a debt instrument's yield-to-maturity (YTM), IRR's application to debt instruments. I think the Investopedia article you have mentioned is a bit misleading in that respect. If mentioned at all, the RICFI ...

2

Just algebra. Plug their $s^*$ into the first of the 2 equations $b\cdot B_1...$ then move things around so that $b$ is alone on the left hand side. Like so: $$b \cdot B_1 + \Big( {{C^u_1-C^d_1}\over{S^u_1-S^d_1}} \Big) S^u_1 = C^u_1,$$ then $$b \cdot B_1 = C^u_1 - \Big( {{C^u_1-C^d_1}\over{S^u_1-S^d_1}} \Big) S^u_1,$$ then b \cdot B_1 = C^u_1 \Big( {{S^...

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