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Thanks for your answer David. I had a look at Stulz Chapter 3 p57-58, and it does not explain how they got the result (it refers to Chapter where they use an Excel function to get the quantile based on a known mean and know volatilty). After re-assessing the computation, I realized that...

Hello David, In your Excel sheet relative to Stulz 3.1.1 Bankruptcy costs, I noticed that you compute a normal deviate. The formula you use is : (Forward Price - Debt Face Value) / (sigma * Forward Price) = -1,43. I was wondering : what is the concept behind the formula ? Do you have any...

OK, Thanks, very clear. We are on the same page ;-) Regards, trabala38

Hello David, While doing Hull ex. 09 18, I encountered an issue: In your solution (cf http://www.bionicturtle.com/wiki/Hull.09.18/), you state: "P>=c + K*EXP[-rT] - S0 and since c = C, P >= C + K*EXP[-rT] - S0, or C - P >= S0 - K*EXP[-rT]" I don't understand why c=C. For me, C>=c due to the...

Thanks a lot for this comment. I had seen in the questions the two different approaches and I now understand where it comes from ! So obvious when you analyze the equation of d1 ! Thanks again, trabala38

Thanks a lot for your answer, David ! Even if the question remains open, knowing that the answer is not straightforward makes me feel more comfortable. I also agree with you : I prefer option a). But I have another argument: The formula exp(rate_continuous) = (1 + rate_discrete_m / m)^m works...

Hello David, Well, working in the energy commodity business, I tend to say that "being long a swap" means that you pay the fixed leg. Why ? Imagine an fixed-for-floating oil swap. Because long means : if oil price goes up, the value of your swap increases. Thus, it means that you should receive...

Hello David, I faced the same kind of issue for Hull 06.13 exercice and I think the problem can be be summed up that way : In Hull 06.13, the 3 months Forward rate = 9% with continuous compounding with actual/365 day count basis (it is Hull's assumption). Then, we need to convert the...

Hello David, I was doing the Hull 06.08 exercice (Cf, Hull Chapters 2 -10PDF, p39) and I got some problems. "The price of a 90-day Treasury bill is quoted at 10." I am able to compute the cash price (Y=$97,50) and to get the interest earned over a 90 day period (Int=$2,5). However, I am bit...

Hello David, In the video for Quantitive Analysis 2.c, I think there is a mistake on slide 31. For H=1hour and lambda=0.25 (like stated in the example), I get the following values: => P (Y > H) = Exp(-0.25*1) = 77.9% (instead of 60.7% stated on the slide) => P (Y < H) = 1- Exp(-0.25*1) =...

Hello ! While reviewing Stulz Chapter 3 - Debut Overhang, a concept does not seem clear to me : the computation of the "existing diluted equity value". In the Excel file 2011.T1.a.2.xlx, the "Existing Equity DILUTED to $23,571". The computation behind is : Existing Equity DILUTED =...