Tagged Questions

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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Improper integral confusing step

The following passage is in my textbook: $$A(S) = \int_0^{\infty} f(E) \max(S-E,0)dE$$ This simplifies to $$A(S) = \int_0^{S} f(E)(S-E) dE$$ Now this is from a finance textbook so it might ...
36 views

Lemme itô and Martingale [on hold]

I want to to find values of $a$, $b$ such that the process: $$e^{W_{t}^2+at+b\int_\limits{0}^{t}W_{s}^2\,ds}$$ be a martingale Could you please help me do that Thank you
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Estimating compound growth

I have a compound interest function with the following parameters: Value at time 0 = 13.8 Interest rate = 0.05 time interval = 10 I need to check quickly, (without a calculator, only pen and paper) ...
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Call spread derivative [closed]

delete this tbh lads, this is not the site for finance questions apparently Using the notation $V(E)$ to mean the value of a European call option with strike $E$, what can you say about ...
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Optimal Insurance Coverage - risk neutral and risk loving consumers

I'm struggling with understanding a problem in finance: We have 2 states: $S_1$: bad state $Y-K = 2000$; probability $\pi$ = 10% $S_2$: normal state $Y = 5000$; probability $1-\pi$ = 90 ...
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Is this a self-financing portfolio?

I have $S_t = 10 + B_t$, $\beta_t = 1$, $a_t = 2B_t$, $b_t = -t - B_t^2 - 20B_t$ Then the value, $V = a_t S_t + b_t \beta_t$ Is this a self financing portfolio? Note, $B_t$ is brownian motion I am ...
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Compounded Interest with Exponentially Increasing Periodic Payments

Given the formula $$v_a = p\left(\frac{\left(1+\frac{r}{n}\right) ^{nt}-1}{\frac{r}{n}}\right)$$ for the value $v_a$ of an account growing at a periodic rate $r$ with a regular deposit $p$ compounded ...
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Single factor model question, related to the benefits of diversifying one's portfolio.

The question: Suppose in a single period investment problem we may divide our wealth between n assets and that the return on the ith security is given by $r_i = \alpha + \beta_i\theta + \epsilon_i,$ ...
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Request for recommendation: Transition textbook for graduate course in mathematical finance or classical math reference book

I am looking for a well-written, theoretically rigorous textbook that contains all the mathematics necessary to transition smoothly to a graduate course in mathematical finance. I am graduating with ...
41 views

Prove $\sum \frac{t}{(1+y)^t }= \frac{y+1}{y^2}$

I see on Wolfram Alpha that $\sum \frac{t}{(1+y)^t} = \frac{y+1}{y^2}$ when t goes to infinity. I cannot, however, proove it myself. What theory is used and how do I start the proof?
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Regarding “Two Singular Diffusion Problems” by William Feller

I'm currently reading the research paper, Two Singular Diffusion Problems, by William Feller (1950). However, I don't understand how Feller derived the solution $(3.5)$ given equation $(3.4)$ in his ...
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How to use the BA II Plus financial calculator to solve for IRR and NPV?

I've calculated the answers manually but would like to learn how to do so on the financial calculator to save time on the test and minimize errors. How to do this? Problem: You have been offered a ...
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Savings account interest rate

Just a brief question regarding bank interest rates, my apologies if this is a duplicate, I did a quick search but came up with no results relating to my question, surprisingly. Also, please excuse ...
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Method for finding a arbitrage opportunity when market price of call is incorrect

The solution of the Black-scholes equation is the price of a European call. And the option price assumes the underlying stock is a geometric Brownian motion with volatility $\sigma_{1}>0$. ...
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Factorals with exponents. Is their a way?

I know of multiplication factorials with the 4! = 4*3*2*1 and I know of the addition with the nth triangle. I am busy deriving my own equation for something, and i am getting stuck on how to furthur ...
30 views

Optimization of stochastic differential equations

Is there a way to optimize or maximize a set of differential equations. such that each equation is represented by a time series S_((t+1),μ) = μ*(S_(t+1)-S_t) + S_t and μ = 2/(i+1), i=1,...,n. Then I ...
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Gaussian distribution finite population with unknown cardinality

I have taken a sample population of a population with unknown size. The sample size is 54 trades. The sample mean is 2.1% (1.021) return per trade. The sample standard deviation is 0.01. 100% of ...