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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Help optimizing payments on 3 loans - planning to use AMPL program but I have math problems first.

So the basis is that I have 3 loans with different interest rates and different principal amounts as well as different minimum monthly payments and different amortization (is that the right word? Time ...
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If A can either increase by 100% or decrease by 50% with equal probability, what will be the arithmetic mean return over n periods?

This is more of a finance related question but deals with some discrete probability and or combinations. The question goes like this. If you buy stock A, and it has a 50% chance of going up 100% in ...
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It is known that the VaR (Value at risk) doesn't fulfill subadditivity, i.e. $VaR(X)+VaR(Y) \le VaR(X+Y)$. But for elliptical distributions subadditivity is true. Questions: (1) Which ...
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Differentiating an Option Payoff

Okay this is probably going to be an extremely easy/straightforward question but I thought I should post it here just to double check. Suppose I have a payoff $\Phi = (S_{T}-K)^{+}$. Now let's say I ...
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What is the difference among three kinds of continuous income stream?

In the chapter of our book , we discuss "Tolal value of continuous income stream:$\int_a^bR(t)dt$" "Future value of continuous income stream:$\int_a^bR(t)e^{r(b-t)}dt$" "Present value of continuous ...
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Replicant portfolio with commissions (Jarrow rudd)

I have created a Jarrow Rudd three for a call option that I know how to replicate with a portfolio. A replicating portfolio of a option works this way: At time 0 we form a replicating portfolio ...
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SDE Solution: Hull-White extension of Vasicek model

I am trying to figure out the particular ansatz (if that's all there is) for the solution to the SDE: $dr_t = [v_t - ar_t]dt + \sigma dW_t,$ where $a$ is constant and $v,t$ are, potentially, time-...
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Deciding whether a maximum asset price process is a markov process

I understand how Mn has been drawn. For the second computing part, after computing, I have no idea how to decide if Mn is a markov process I don't understand the solution at all, don't know what the ...
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Finance Algeabra: Converting a Discount Polynomial Function to an Interest Rate Polynomial Function

I have a finance problem that is 99% mathematical. In finance, the price of a bond could be modelled as the discounted value of its future cash flows, so something like: ...
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Solve for the interest rate while we are not told if it is simple or compound.

You are offered to have a discount of \$20 if you pay cash now for \$1500 due in 120 days. If you pay cash now, at what rate may you consider your money to be earning interest for the next 120 days? ...
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Financial Mathematics--Finding Compounding Period given Annual and Effective Interest Rates

I'm trying to find a compounding period C when given an annual interest rate r and effective annual yield i. I'm working with the following equation: $i=(1+r/C)^C-1$ I'm having trouble re-writing ...
A $60$-month loan is too be repaid with level payments of $1000$ at the end of each month. The interest in the last payment is $7.44$. Calculate the total interest paid over the life of the loan. Let ...
$B$ is a one-dimensional Brownian motion and $X_t$ is defined as$\\$ $X_t:=f_{1-t}(B_t)$, $0\le t<1$ and $0$, $1\le t<\infty$ where $f_s(x)=\frac{1}{\sqrt{2\pi s}}e^{-\frac{x^2}{2s}}$. I have to ...