# 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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### 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 ...
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### 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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Is it possible to find a closed form solution of the value of an asian option paying $(\int_0^T S_u du)^2$ at maturity? I know there is no closed form solution if the payoff is of the type $(\int_0^T ... 1answer 76 views ### Deriving the difference between compound interest and simple interest What is the derivation for the formula that gives the difference between compound interest and simple interest after three years:$P\left(\frac R{100}\right)^2 \left(\frac R{100} + 3\right)$? It is ... 0answers 41 views ### How to calculate the daily late fee? Due to my ignorance, I owe the mobile service provider$701. The penalty is 3% per day. That means on day 1, I should pay $701 + 701\times0.003$ On day 2, I should pay $701 + ... 0answers 16 views ### FM question: Price call option with dividend paying? In a binomial tree model with dividends, if stock price goes up in the latest period, then a dividend of$0.5 will be paid out;otherwise, no dividend is paying out. The stock price at time n is: ...
I need to show that the price of a plain European call option is a convex function of the strike E of the option i.e. show that $\frac{\partial^2 C}{\partial E ^2} \geq 0$