Questions having to do with financial mathematics. Please note that for questions in quantitative finance, quant.stackexchange.com is perhaps a better site.

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16 views

Currency conversion using available rates

I have the following rates available: USD -> USD = 1 USD -> EUR = 0.887662 USD -> GBP = 0.654514 I want to calculate the following rates ...
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0answers
33 views

Bullets versus Barbells. [on hold]

I've been working this problem out for a while and can use your help. I understand the par value and how to derive at the mod. duration and think I even understand convexity. I am struggling to find ...
-3
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0answers
29 views

What will be the impact of the Euro’s devaluation on Coca Cola’s margins and Net Income? [on hold]

Coca Cola Europe sells 80% of its product denominated in Euros and 20% denominated in GBP. 90% of its costs are denominated in Euros and the rest in \$US. At the present time, it enjoys net ...
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1answer
12 views

Clarification on the set-up of this interest theory problem

The following problem and solution is taken from an actuarial exam (financial math) study manual: I would set this problem up completely different. I think it would be necessary to consider the ...
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1answer
10 views

Isolate Costs in NPV equation

Hey can anyone help with this? This is the classic NPV equation: NPV = -CapEx + ∑ (Revenue − Costs) / (1+Discount)^i The partial sum is from i = 0 to n years. For my purposes all the elements ...
1
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1answer
28 views

A credit model. Default time.

In a paper, I find the following situation: Let $(\Omega,\mathcal{G},\mathbb{Q})$ be a probability space. $\mathbb{Q}$ is supposed to be a risk neutral measure. Suppose that ...
0
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2answers
40 views

Geometric progression (compound interest)

"A man, who started work in 1990, planned an investment for his retirement in 2030 in the following way. On the first day of each year, from 1990 to 2029 inclusive, he is to place £100 in an ...
-1
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1answer
31 views

Months for the amount paid to be equal? [on hold]

If I take my pension now I can get $\$2,000$ a month. If I wait $12$ months I can get $\$2,500$. How many months will it take for the total amount paid to me be equal?
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0answers
24 views

In an incomplete market does every payoff function admit at least two arbitrage-free pricings?

Consider an arbitrage-free (not necessarily complete) market. Prove or disprove the following assertion. If the market is incomplete, then every payoff function $A : \Omega \rightarrow \mathbb{R}$ ...
2
votes
1answer
19 views

Clarification on a collared stock being equivalent to a bull spread?

The following is a question on financial math from the financial math actuarial exam: Earlier in the manual, the author stated that a collared stock is equivalent to a bull spread. Therefore, in ...
0
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1answer
18 views

What equal installment of annual payment will discharge a debt which is due as 848 at the end of 4 years at 4% per annum simple interest?

What equal installment of annual payment will discharge a debt which is due as Rs. 848 at the end of 4 years at 4% per annum simple interest? The above question can be calculated by using the ...
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2answers
26 views

Bank interest but reversed problem - how much was the first money deposited?

Suppose I have money ($x$) in a bank account bank with compound interest of $5\%$ annually paid monthly. Bank gives me $20,000$ usd a month and the money $x$ finishes in $20$ years ($240$ months). How ...
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0answers
39 views

Are these Finance-related calculations correctly solved?

1)A car costs R130 000 is advertised:'no deposit necessary and first payment due three month after date of purchase'.The interest rate is 18% p.a compounded monthly. 1.1)Calculate the amount owing ...
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0answers
18 views

please help with these questions [duplicate]

A car costs R130 000 is advertised:'no deposit necessary and first payment due three month after date of purchase'.the interest rate is 18% p.a compounded monthly. Calculate the amount owing two ...
0
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1answer
31 views

Quick Finance Question?

I have just signed a lease that requires me to repay $100,000 over 10 years with payments starting today. What is my annual repayment if the effective interest rate is 7% p.a.? I did ...
0
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1answer
27 views

Future Value of Annuity Compounded Daily?

(a) What is the future value of $4$ payments of $\$300$ made at the end of each year with interest rate being $11\%$ p.a. compounded daily? I did $300 (1 + 0.11/365)^{365}\cdot 4 -1)/0.11/365 = ...
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0answers
12 views

Exact solution to nonlinear backward SDE

I have read a paper about numerical SDE. After deriving the method, it uses the method to calculate the following nonlinear cases: $$\begin{cases} dX_t=ud\tau+\sigma ...
1
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0answers
22 views

Annunity calculation with and without tax

I'm doing a annunity calculation: payment = 331880*( 0,002458333 /( 1-(1+0,002458333)^-84) ) This will return me the payment per. month of the loan ...
0
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0answers
11 views

Cumulative Return between two dates

I have a table that carries data with cumulative return of some instrument. Data is described with start date, end date and cumulative return for date range (start-end): ...
0
votes
1answer
27 views

Black-Scholes: solve for $\sigma$ given $d_1$ and $d_2$

Black Scholes valuation for european call option is: $$C_0=S_0N(d_1)-Xe^{-rT}N(d_2)$$ where $d_1=\dfrac{\ln(\frac{S_0}{x})+(r+{\sigma^2\over2})T}{\sigma\sqrt{T}}$ and ...
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vote
5answers
49 views

Continuously Compounded Interest

What exactly does it mean? By continuously compounded it makes me think it is almost like multiplied as time goes on. Could someone also explain what the constant e is and how it originated? Also how ...
3
votes
1answer
54 views

What's the purpose of this unknown (financial) math formula?

I am maintaining an old piece of financial software. In the source code I have found an implementation of the following formula: $$p2 \over (p1 + 1) - (p1 * p2)$$ The formula is used as part of some ...
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0answers
8 views

Calculation the affect of inflation on investments

Does inflation affect how you calculate interest in a term deposit, appreciation of collectibles and depreciation of a motor vehicle?
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1answer
39 views

Calculate payoff time for PV system

I want to calculate the payoff time for a photovoltaic system. Some constants: Current electricity price per kWh: 0,122 EUR Electricity production per yearh: 4427 kWh Annual electricity price ...
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0answers
27 views

Looking for a Formula for ROI, couldn't get an answer in Finance

This is honestly a pretty simple problem, but for whatever reason I am not able to pull it all together. I was talking theoretically with a friend and neither of us can nail down the maths so I coming ...
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0answers
38 views

Options Pricing / Delta -Mathematical Finance

Consider Apple Inc. as the underlying asset, use its daily adjusted closing prices from August 12, 2014 to August 12, 2015 as historical data to estimate standard deviation. Use the rate r = 0.005 as ...
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1answer
28 views

Rate of Return / Standard Deviation / Correlation Coefficient - Mathematical Finance

Consider these two stocks: AT&T Inc. (T) and Verizon Communications Inc. (VZ). Use the daily adjusted closing prices from March 1, 2015 to August 12, 2015 as historical data. Estimate the mean ...
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0answers
48 views

Ito's Lemma / Expected Value / Variance - Mathematical Finance

Assume an asset price $S_t$ follows the geometric Brownian motion $$\Bbb dS_t = \mu S_t\Bbb dt + \sigma S_t\Bbb dWt,$$ where $\mu$ and $\sigma$ are constants and $r$ is the risk-free rate. ...
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0answers
23 views

Calculating percentages of margins

If a company has three tiers of pricing for its product and its overall margin is $20\%$, is it possible to calculate the percentage margin of each tier from following information? Tier 1 = base ...
0
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0answers
10 views

How do I choose the appropriate eigenvalues for Kinetic Component Analysis (or an Extended Kalman Filter)?

KCA (Kinetic Component Analysis) basically applies an Extended Kalman Filter after a taylor series expansion of a signal. By using this state space approach, the noise is reduced, and predictions can ...
-4
votes
1answer
37 views

Rearrange and solve for $N: 16 = \frac{1}{n}\cdot 25 + \frac{n-1}{n} \cdot 218.75$

I need to solve for $N$ to get $16$ with the following formula, I'm very bad a re-arranging though, so does anyone have an answer to this? $$16 = \frac 1 n \cdot 25 + \frac{n-1} n \cdot218.75$$ ...
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0answers
25 views

Active partner in a partnership (active for a few months only)

X, Y and Z start a venture together. Y and Z invest \$4000 and \$3000 respectively while X invests \$1000 initially and after 6 months withdraws his capital and decides to work as a working partner ...
2
votes
3answers
129 views

A double call option problem

A $(K_1, t_1, K_2, t_2)$ double call option is one that can be exercised either at time $t_1$ with strike price $K_1$ or at time $t_2$ ($t_2 > t_1$) with strike price $K_2$. Argue that you would ...
2
votes
0answers
30 views

Linear combination of Geometric Brownian Motions

Let $X_t= e^{\left(\mu-\sigma^2/2 \right)t+\sigma W_t}$ be a geometric Brownian motion with drift $\mu$ and volatility $\sigma$. I am trying to derive an analytical solution to $$\mathbb{E}\left[ ...
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0answers
17 views

Immediate Annuities

For a house loan of $\$300000$ at $4.65\% \ p.a$, the repayment is an $\$2,210$ per month for the first 60 months and then finishes the loan at $\$1960$. What are the total repayments of loan and how ...
0
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1answer
50 views

How to calculate interest rate given cash flows and period in days instead of years.

I am presented with an investment opportunity where I am given #481,000 on day 1. Thereafter, every 10 days, I am required to give back #50,000 every for 100 days (10 * 50000 = 500000). How do I ...
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2answers
58 views

For what fixed interest rates is a certain single-period, finite-state market arbitrage free?

A single period market with three states of nature $\omega_1$, $\omega_2$ and $\omega_3$ is given, in which a single asset is available, namely a stock that is worth $8$ units today, and whose payoff ...
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3answers
35 views

Interest Question [closed]

If somebody owes \$55k and pays it back in four years with 6.4% interest p.a, how much would it be if its compounded quarterly? So I used $$A=P(1+i/4)^{4(4)}$$ and plugged it in as ...
1
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1answer
31 views

About the boundary conditions of the Black-Scholes-Merton PDE

I have a question about the solution of the Black-Scholes PDE for the European call option when I read the book Stochastic Calculus for Finance II of Steven E.Shreve. Let $c(t,x)$ be the value of the ...
1
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1answer
22 views

Evaluating NPV caluclators

I'm working on a Net Present Value set of problems and would appreciate someone else's insight as my Excel calculations are coming up differently than other online calculators for NPV. I've read on ...
0
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0answers
24 views

Strange Monte Carlo Sampling Phenomena

I am running a Monte Carlo simulation to price call and put options, and observe a strange correlation between the number of sampling points and the standard deviation. It makes sense that as the ...
0
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1answer
26 views

Lower semicontinuous risk measure

I am looking for some risk measures that hold the lower semi-continuous property. I am not sure whether Expected Shortfall is a such a measure or not. Can anyone give me some help? Thanks.
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0answers
13 views

Not monotonically decreasing Net Present Value for increasing interest rates

Considering the Net Present Value as the discounted sum of all future cash flows, intuitively I expected that the NPV function would always be monotonically decreasing for any increase in the discount ...
2
votes
1answer
72 views

A more theoretical than computational interest theory problem involving amortization

I am working on the following problem: A borrower has a mortgage that calls for level annual payments of 1 at the end of each year for 20 years. At the time of the seventh regular payment an ...
0
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1answer
40 views

Calculate interest over multiple years with added value every year?

I'm trying to calculate the interest and total of money when : Someone is loaning $3600 every year over 11 years with an interest of 10% ? Like : 3600 + 10% = 3960 first year, 3960+3600+10% = 8316 ...
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0answers
21 views

Compounded and Simple Interest Rates

Suppose we have a loan worth 10000 that is being repaid late as a lump sum on a given day 30 days after the due date. Suppose the original interest rate is 5% so that the amount owed before late ...
3
votes
0answers
50 views

Asymptotic Expansion Method for Pricing American Option

In this Article I faced with Asymptotic Expansion method for pricing American option. the price $P(S,t)$ of this option satisfies the partial differential equation (PDE): $${{P}_{t}}+(r-\delta ...
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0answers
64 views

A question of odds

Consider an experiment with four possible outcomes, and suppose that the quoted odds for the first three of these outcomes are as follows. What must be the odds against outcome 4 if ...
0
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1answer
31 views

identifying sudden change in value given a list of values over time

I have a list of the average price of an item in a game over time. Things don't tend to move much. I am wondering how I can detect whether a new value inserted is a surprising movement in price. I ...
1
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2answers
35 views

Intuition - For every % point that rates rise, a bond’s value will decline by its duration in years.

[Source:] Generally speaking, for every percentage point that rates rise, a bond’s value will decline by its duration (stated in years). So if rates climb by one percentage point, the value of a ...