Questions having to do with financial mathematics. Please note that for questions in quantitative finance, quant.stackexchange.com is perhaps a better site.
2
votes
1answer
214 views
How to get Annualized volatility from monthly return?
Suppose the average monthly return is $\mu$, the monthly standard deviation is $\sigma$ and denote the autocorrelation of monthly returns by
$corr(r_i,r_{i+h}) = \rho(h)$
Prove that, when $\sigma$ ...
1
vote
1answer
237 views
How to find Profit percent in this case?
A trader allows a discount of 20% on his goods and still makes a profit of 25%.Find the profit percent made, if he sells his goods at:
(1) the Marker price
(2) at 10% discount
What i've tried:
...
-3
votes
1answer
118 views
How to find cost price in a problem concerning discount?
A dealer is selling an article at a discount of 5% on the marked price.
(1) What is the selling price, if the marked price is 140.
(2) What is the cost price, if the marked price is 12% above the ...
1
vote
1answer
1k views
How do you calculate “excess returns”?
(Although this is perhaps a very simple question, math-wise, it still has me puzzled so it's okay to ask for help here I guess. I really need to understand this, so any help is appreciated)
First, ...
1
vote
2answers
74 views
How to find the original population if it increases with a constant rate?
The population increases by 5% every year. What was the population in 1982, if in 1985 it was 1,85220?
My working:
...
0
votes
2answers
711 views
How to find rate of depreciation in this problem?
The value of a machine is estimated to be 27,000 at the end of 1994 and 21,870 at the beginning of 1997. Supposing it depreciates at a constant rate per year of it's value at the beginning of the ...
0
votes
2answers
1k views
What is the formula for the difference between CI and SI?
if principal, time and rate are given how do i find the difference between Compound interest and Simple Interest?
P=12,000
n=1 and a 1/2 yrs.
R=10% per year
...
1
vote
1answer
64 views
Calculate Compounding Interest Rate From Total Interest Rate?
I would like to be able to calculate the interest rate that is compounded for a given total interest rate, and number of compounding events.
TotalInterestRate = ...
3
votes
1answer
70 views
How the banker limits his risk?
In a game like Deal or no Deal, what is the formula the banker uses to give an offer to the contestant? The banker offers the contestant an amount of money to quit the game, the offer based roughly on ...
1
vote
0answers
65 views
Compactness of the set of densities of equivalent martingale measures
Consider an incomplete market $(\Omega,\mathcal F,\mathbb P)$ driven by a semimartingale $S=(S_t)_{t\in[0,T]}$. Under the no free lunch under vanishing risk (NFLVR) assumption, the set $\mathcal ...
0
votes
1answer
115 views
How to handle the following percentage scenarios?
I have the following scenarios, but I am unclear on how to handle them correctly. I start off with a value like 200 and the following scenarios are:
Remove 10% from 200, and then remove a compound ...
0
votes
0answers
38 views
Regime switching models
I would be extremely grateful if you could point me to any good source on Regime switching, mainly:
What we define as regime switch
Different kinds of regimes (trend, high/low vol)
Attempts at ...
1
vote
1answer
283 views
Formula for APR with Odd Days
I need to programmatically calculate APR based on the following inputs:
Principal Amount
Number of payments (for example, 3 months loan is 3 if paying monthly, or 6 bi-weekly payments)
Payment each ...
1
vote
0answers
74 views
Good reference on sample autocorrelation?
I'm not a statistician but I'm writing my thesis on mathematical finance and I think it would be neat to have a short section about independence of stock returns. I need to get better understanding ...
1
vote
1answer
99 views
Book or resources to learn about algorithms for detecting arbitrage opportunities in slow markets (not HFT)
All of the trading algorithms I see online relate to high-frequency trading in fast-moving high-volume markets.
Can someone point me to some resources about automated trading (detecting arbitrage ...
3
votes
1answer
165 views
Futures pricing and futures price process under the real world measure
This is something that keeps bothering me about the Benchmark approach of Platen, which (very) shortly is as follows: Compare the development of an economic value with a growth optimal portfolio. ...
1
vote
1answer
178 views
One step in the derivation of Black-Scholes
One step in the derivation of Black-Scholes
Assumptions:(1) ${\displaystyle \frac{\partial F}{\partial t}(t,x)+\frac{1}{2}\sigma^{2}x^{2}\frac{\partial^{2}F}{\partial ...
0
votes
2answers
391 views
How to calculate CAGR for shares bought at different times?
I have bought shares at following times:
...
0
votes
4answers
130 views
What is the difference between the 2 ways to remove percentages?
Given the value $690$, I want to remove $10$% from that and then remove another $20$% from the resulting value, so as an example, I am doing:
$690 \over {(1 + 0.1 + 0.2})$ = $690 \over {1.3}$ = ...
0
votes
1answer
248 views
Figuring a loan payoff amount
I have a loan for a principal amount of \$117,000.00 at 9.75% interest and a total amount due (including the interest for 84 months) of \$191,805.60. I had 84 months to pay it off, or I could pay it ...
1
vote
1answer
454 views
brownian motion-proof of Martingale
Can anyone help me with the following problem?
Let $W(t), t\geq 0$ be a Brownian motion with filtration:$F(t)$. Let $0\leq s\leq t$.
1- Show that $E\left [ W^{3}(t)\mid F(s) \right ...
0
votes
1answer
73 views
Determine Present value if you have a payment, interest rate, term
If I have a payment amount, interest rate, and term can I determine the Present Value?
for example:
...
0
votes
1answer
1k views
Is it possible to calculate weights of a portfolio with negative values?
Sorry in advance if this question is either too basic or really dumb, but I've been researching this and am a bit confused. I'm trying to help my niece with a question she has and the gist of it is ...
1
vote
0answers
24 views
Standard practice for identifying outlying spend amounts
Hope this is mathematical enough to qualify as a question - I'm no mathematician!
I have a set of individuals travel & entertainment credit card spend, and I'd like to highlight any outliers that ...
1
vote
0answers
63 views
Portfolio optimization - problem with a proof
I'm trying to proof Proposition 1 in this Paper about Markowitz Portfolio Opitimization on page 6/7 but I can't figure out how to do this. The author wrote "The proof of Proposition 1 can be found ...
0
votes
0answers
119 views
Portfolio convexity proof
Consider $n$ different fixed-income securities with prices $P_1 , P_2 , \ldots , P_n$
and convexities $C_1 , C_2 , \ldots , C_n$ respectively. Assume that all securities have the same yield. Prove ...
2
votes
1answer
693 views
Continually Compounded Interest + Addition to Principal
This is essentially the continually compounded version of this question.
I want to know how much money I will have after continually compounding interest, plus continually adding a fixed amount to ...
1
vote
1answer
1k views
Effective Annual Rate Calculation: Tricky periods and payout frequencies
For calculating the Effective Annual Rate (EAR) from various stated interest rates, I'm using the formula:
$$EAR= \left(1+\frac{r}{p}\right)^{pt}-1$$
where,
$p$ = no. of payouts in a period,
$t$ = ...
2
votes
2answers
190 views
Black Scholes model
I am looking to program the Black Scholes model, but I don't understand how to write this equation as basic math.
Equation => http://en.wikipedia.org/wiki/Black%E2%80%93Scholes
Known inputs => ...
1
vote
0answers
222 views
Reading advice: Mathematical finance for a student of pure mathematics
Which books/lecture notes should a student with a background in pure mathematics (in my case it was geared towards algebraic geometry) read in order to do financial math? I have done one basic course ...
1
vote
1answer
241 views
today's price of a European put option with payoff $(K-S_1)^+$
I'm trying to calculate the today's price of a European put option, which strikes at price $K$, so that the payoff is $(K-S_1)^+$, in an arbitrage-free, one-period market.
As of now, I can only think ...
3
votes
1answer
1k views
Price of a European Call option is a convex function of strike price K
I'm trying to show that the price of a European call option (payoff function is $(S_1-K)^+$) in a no-arbitrage market is a decreasing and convex function of K.
That it shall be decreasing makes sense; ...
0
votes
2answers
374 views
Matlab multivariate normal distribution parameters (mvnrnd)
I need to use the mvnrnd function in matlab to generate random monthly returns for a set of assets. However, I am a bit confused about how to use this function to do it since it asks me MU and SIGMA ...
0
votes
1answer
272 views
Are quadprog and portopt equivalent in Matlab?
What exactly is the difference between quadprog and portopt in Matlab? For example if I use quadprog (minimizing the variance) in a loop in which I continuously iterate through the expected returns of ...
1
vote
1answer
982 views
Matlab Trust-region-reflective algorithm warning
I am very new to matlab and trying to solve portfolio optimization problem (minimizing the variance) using quadprog:
...
0
votes
2answers
62 views
How is it possible to revise for a maths test of this type - Which is the best method to solve it
I need some help with this question, My answer to question E) is 1880 pounds per year, can anyone suggest a different answer, also does anyone know how would I revise for questions of this type.
...
0
votes
1answer
1k views
Using Matlab quadprog to solve markowitz model
I have the markowitz model shown below and I need to use the quadprog function to solve it (i.e get the values for w_i values). However I am a bit new to mat lab and not sure which definition of ...
1
vote
1answer
263 views
Markowitz portfolio optimization
Say that there are 5 assets with given mean values, standard deviations and correlations. Is it possible to find the expected return of a risk-seeking portfolio (maximum expected return) by using ...
0
votes
1answer
259 views
Price-Yield Curve with Matlab
Not sure if this is the right place to ask but I was wondering if anyone has an idea about how to draw a Price-Yield curve. Is there ready-to-use formulas for this purpose ? An example of curve and ...
7
votes
4answers
505 views
How do you solve equations of any degree?
I have stuck solving this problem of financial mathematics, in this equation:
$$\frac{(1+x)^{8}-1}{x}=11$$
I'm stuck in this eight grade equation:
...
0
votes
2answers
198 views
Portfolio Optimization Problem Without Correlation Info
I received this interesting problem from a friend today:
Assume that you are a portfolio manager with $10 million to allocate to hedge funds. The due diligence team has identified the following ...
-3
votes
1answer
358 views
How do you calculate a firms Total Asset Turnover? With only ROA and Profit Margin. [closed]
Frosch Inc. has an ROA of 9.5% and a Profit Margin of 4.0%. What is the firm's Total Asset Turnover?
0
votes
3answers
12k views
What is the formula for calculating Profit Percentage?
Let cost price of an item be $C$, selling price be $S$. Assume the seller gets benefited.
Then, Profit, $P = S - C$.
Now, What is formula for calculating Profit Percent?
$P \% = \dfrac{P}{C} ...
0
votes
4answers
358 views
Find out monthly growth based on yearly growth
Let's say I have a number, 10, and over a period of a year that number has increased by 100% to ...
6
votes
1answer
2k views
Average percent increase not equal to total percent increase?
I tried searching around for this but it was difficult to boil down the search terms. Plus nothing seemed to be showing up anyway.
What's an easy way to show that the average percentage increase of n ...
0
votes
2answers
71 views
What is the value of x with exponential growth but decreases as it reaches its maximum?
I am building a financial model. I am looking for the value of Y:number of subscribers over X:month.
The model calls for the following.
Competing of a market with 500,000 exclusive subscribers.
...
0
votes
1answer
198 views
Real-world example for utility theory
I'm stuck with Utility Theory. As I understand it, we have
vector $\vec{x}$ representing evidence about the world
$n$ possible states of the world $S = \{S_{1}, S_{2}, ..., S_{n}\}$
$m$ possible ...
0
votes
1answer
568 views
Need a Master's Thesis Topic - Want it to be Applicable to Finance [closed]
So I'm a senior undergraduate but I'm also getting a Master's and consequently need to write a Master's Thesis, but I'm having trouble coming up with a topic. I'm working in finance last year and ...
0
votes
1answer
81 views
Reducing balance with overall percentage
Hi I have an item for £4000 which should have a reduction of 20% over the year.
I want to calculate the value for each month. What equation would I use?
4
votes
1answer
160 views
Maximizing gambling performance over the long run
Background. We can play a game in which we can put one dollar and get out $X$ dollars, where $X$ is 2 dollars with probability $p>1/2$, or zero dollars with probability $1-p$. We also assume that ...
