# 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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### 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 ...
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### 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 ...
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### 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 ...
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### Question about the conditional value-at-risk

I have a question about CVaR (Expected Shortfall) An investment who gives a certain amount of cash with a certain probability : A loss of $20$ millions with a probability of $0.0016$ A loss of $11$ ...
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### Getting VAR parameters from a research paper.

Many econometrics papers provide the parameters used in their VAR model. If I notate my VAR model as $$z_{t+1} = c + B z_{t} + \Sigma \epsilon_{t+1}$$ where $\epsilon \sim N(0, I)$, then I need to ...
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### Using IRR to calculate future value of cashflow

Discounting a cashflow using given forward rates will result in the following present value: PV = 102.875 = ${5\over (1+3\%)}$ + ${5\over (1+3\%)(1+4\%)}$ + ${105\over (1+3\%)(1+4\%)(1+5\%)}$ where ...
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### Semi Annual Deposit Compounded Quarterly

A son planned to endow 1000000 to his son on his son's 21st birtthday. How much is his semi-annual deposit in a special account that earns 5% compounded quarterly if the first deposit was made when ...
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### Retirement Fund with Interest

A young woman 22 years of age has just graduated from college. She accepts a good job and desires to establish her own retirement fund. At the end of each year thereafter she plans to deposit 2000 in ...
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### Interest with Inspection Fee in Promissory Note

A man borrowed from a bank a promissory note that he signed in the amount of 25000 for a period of one year. He received only the amount 21915 after the bank collected the advance interest and an ...
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### Money doubling in value

I understand this maybe a question for http://quant.stackexchange.com/; but I believe the math is simple enough to understand. In How many months at an interest rate of 1% per month does money have ...
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### Mean and variance regime-switching model

Suppose we have the following model for stock price: $$X_{t}=X_{0}\exp\left(\int_{0}^{t}(r-\frac{1}{2}\sigma_{\epsilon(s)}^2)ds+\int_{0}^{t} \sigma_{\epsilon(s)}dW_{s}\right)$$ This follows a normal ...
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### What math preparation is needed before reading the mathematical method in financial markets?

What math preparation and books are needed before reading the mathematical method in financial markets by Marc Yor if i need to study the whole book? This is one of the advanced finance book
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### Understanding the solution to a basic annuity problem involving an unknown interest rate

The following is the problem and the solution: Before looking at the solution, here is how I approached the problem: Let $X$ be the amount that each child receives. (i) and (ii) imply that ...
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### Question related to profit/loss.

Guys see this question: For what sum should goods worth Rs. 1150 be insured at 8% so that in case of loss the owner may recover the premium as well as the goods? I can't understand the meaning ...
56 views

### Is this equation a parabola or a hyperbola?

In a 1972 paper by Robert Merton, the following equation is derived: $$\sigma(\mu;A,B,C,D)=\sqrt{\frac{A \mu^2-2B\mu+C}{D}}$$ This is known as the Markowitz frontier in finance. When this is ...
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### Looking for a “Black-Scholes-esque” expression for $E[\max(V-K,Y)]$

In Hull (2008, p. 307), the following equation is found (Eq. 13A.2): $$E[\max(V-K,0)]=\int_{K}^{\infty} (V-K)g(V)\:dV$$ Where $g(V)$ is the PDF of $V$, $K$ is a constant, and both $V,K>0$. He ...
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### Financial Mathematics, Simple interest question. Help.

Laurie deposits $\$60,000$in a bank at$5\%$interest per annum. Andrew deposits$\$40,000$ in bank at $8\%$ per annum. How long wil it take, by simple interest, for Andrew to have more money ...
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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 ...
81 views

### Lemme itô and Martingale [closed]

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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### I'm trying to reverse engineer a formula to find answers without trial and error.

As an example, I need to pay €100 to this business, and there are 2 separate fees I need to also pay, the fee for the payment processor and the VAT (Value Added Tax). I know that the fee for the ...
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### Risk-neutral (i.e. martingale) measure if density is given for a single random variable (i.e. asset)

Let $(\Omega,\mathcal F, P)$ be a probability space. And let $S : \Omega \to \mathbb R$ be a random variable, called an asset, also we are given $\pi > 0$ called a price and some $r \ge 0$ called ...
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### Maximum value for a dependent variable in a marginal effect model

I am unsure as to whether my calculations are correct. Currently, the model given is: The first question was to derive an equation for the marginal effects of EDU on In(Wage). I obtained the ...
26 views

### Ratio vs Difference in terms of growth

Suppose we have the following data: start date end date quantity 01/05/2014 07/05/2015 5 07/06/2015 02/06/2016 8 What ...
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### Automatic differentiation for finance

we're estimating sensitivities with automatic differentiation. What we have read about it the adjoint (reverse) should perform more efficiently than the forward mode when there are more input ...
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### No arbitrage iff there EMM $P^*$ theorem [closed]

The definition of an arbitrage I was given: "An arbitrage strategy is an admissible strategy with zero initial value and positive probability of a positive final value." I think that an initial ...