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Hi, Here the swap is already initiated before so that the payments are based on the 6 months rates and we are here finding the value of the swap when swap has 15 months left to expire. thanks

Hi, Let 95% value at risk (Var) be X. integration from 1 to e^5( f(x)dx) =1=> integration from 1 to e^5 (c ln(x) )=> c(5-0)=1=>c=1/5 integration from X to e^5 (f(x)dx) = integration from X to e^5 (c/x dx) = integration from X to e^5 (c ln(x)) = (1/5)*(-ln(X)+5)=.05 =>lnX=4.75 =>X=e^4.75 = $...

Hi, Yes e-books are easy to read and easy to navigate. You can make comments and notes.portable,clean,easily accessible and saves trees. thanks

Hi Nicole, please let it accrue. thanks

Hi, Over time the Futures price converges to the actual market or spot price of the asset at the Delivery time. thanks

Hi, there are differences while Var is the maximum loss that can happen at a given confidence level while the economic capital is the capital that the bank keeps to face unexpected losses. The difference between the Credit Var and the expected loss is the economic capital. The bank can face the...

Hi, Covar(X,Y) = E[(X-mean(X))(Y-mean(Y))] is the expected value of the cross products of the deviations of variables X and Y from their means. Var(X+Y) is the variance of the portfolio with two constituents X and Y with their variances as Var(X) and Var(Y) and co-variance b/w them as...

Hi, The forward price remains the same in the contract until the maturity of the contract but its the value of the contract that keeps on changing. For e.g. 1 year forward on oil with price of $100 would remain the same that is the agreement to buy the oil in 1 year at $ 100 would be the same...

Hi, The futures price F0 should converge to the spot price ST as the Futures contract approaches maturity T its because otherwise arbitrage is possible. If F0>ST the arbitrageur would step in and short the expensive future and buy the underlying asset at spot price ST just before the maturity...

Hi, It should be average stock price only,here the Average strike is calculated based on the average stock price which is the variable that is under observation. Its Average Strike option where the Average denotes the average stock price and the Strike means that the Strike price is calculated...

Hi, Vt > Ut => Min ( Ut, Vt) = Ut Vt - Max ( Vt - Ut , 0 ) = Vt -(Vt- Ut) = Ut hence, Min ( Ut, Vt) =Vt - Max ( Vt - Ut , 0 ) to prove,Max ( Ut, Vt) = Ut + Max ( Vt - Ut , 0 ) Vt > Ut => Max(Ut,Vt)=Vt Ut+ Max ( Vt - Ut , 0 ) = Ut+ Vt - Ut=Vt

Hi, (according to my logic as i understood it) The effect of jumps in the asset prices tends to evens out in the longer term therefore there is less effect on the volatility of the underlying asset . For shorter period the effect of jumps is more and as the time of maturity increases the...

Hi, I think you need to calculate the days in between when the interest accrues. Its very simple when you know the number of days in each months. Jan=31,Feb=28,Mar=31,Apr=30,May=31,Jun=30,July=31,Aug=31,Sep=30,Oct=31,Nov=30,Dec=31 You need to calculate the days between January 10 to March 5...

Hi, please see from David: https://forum.bionicturtle.com/threads/difference-between-active-and-residual-return-risk.7216/#post-25675 thanks

Hi, Interest rate futures are Eurodollar futures and the Treasury Bond futures. In the Treasury Bond futures you should find important how to calculate the Conversion factor, how to find cash price and clean price,how to find cheapest to deliver Bond,how to find accrued interest. In the...

Hi, Here there is concept of arbitrage,if the Future contracts and Forward contracts are not priced to have zero value then the arbitrageur can step in and can exploit the opportunity thereby making a riskless profit. You can refer to cash and carry model example. Suppose the...

Hi gargi, You are not paying anything when you entered into the derivative contract therefore its cost less to purchase the derivative.Here you are just converting the derivative into another derivative with a zero cost but somewhat a different payoff structure. For (hypothetical )e.g. if you...

Hi, Bankers's trust promised its customers that it would be fair and ethical in all its dealings and business conduct. However the BT failed to keep up to its promise as it mislead and manipulated P&G and Gibson and did some unethical business therefore breaching the customer conduct(ethical...

Hi, please see: https://forum.bionicturtle.com/threads/important-please-read-updated-materials-for-2015.8199/#post-33251 also see if you like, https://forum.bionicturtle.com/threads/start-studying-for-2013.6582/#post-21719...

Hi, Yes according to me many of the Formulas in formula list above are still relevant for Part II apart from some minor changes. thanks