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Assume it's the put-call parity and all variables are given except the risk free rate (r). The answer in the book does not provide the detail. Is there a quick way to find the r in this equation by the calculator or can you guide step by step what to do: -23.79 = -24 e^(-0.25 r)

Thanks,

Thanks Chiyui, It seems that the further we discussing this matter, we're getting into trading strategies of options and futures. However, I understand that there is only one formula for the Optimal Hedge Ratio (at least for the exam concerns) and there is no variations.

All the practice questions I found were only using 1 type of futures; there was no combination.

Hi Chiyui, When I was making a presentation of a project for a statistics course in college, the prof. got me on that and said the same thing you mentioned for the correlation between crude oil futures and other variables such currency, electricity, etc. Thanks and I got the points you...

Hi David, thanks for your efforts in discussing it with GARP. I find the range of materials very broad and topics overlapping to the extent that I can't study and understand without first rearranging the topics. For section 3 of part 1, I categorized the topics into the below categories. Even...

I had this confusion when I asked about the difference between Beta and Optimal Hedge Ration, but did't post it at that time because I thought I should not waste time on statistics and that it might be not included in the exam. However, there is an example in the study materials explaining...

I agree and I think it comes down to how statistics and math is being used in finance. They say that it's enough to know how to use the formulas but I disagree because knowing the formula does not mean that the student understood the subject/system/the way it actually works/the reason behind it...

Thanks David, I just read the FRA method which is is exactly what I'm talking about. I see the only difference between the Bonds method and FRA method in the calculating of the B(Floating). Moreover, I see the Bonds method in calculating B(floating) as the mathematically proven...

I understand that: V=B(fixed) - B(floating) or the reverse. Also assume the payments are at 6,12,18 months I find the calculation of B(fixed) and intuitive and logical: B(fixed): First Payment + Second Payment + Third Payment First Payment = PV of [PMT(fixed) at end of month 6] Second...

Thanks David, the CTD identification is clarified but I still don't understand the the whole CTD process and who pays to who and how much. I need to review more practice questions before being able to phrase my confusion. Thanks for your prompt replies,

Hi David, Thanks, so solving the same question with the correct formula gives the following results: a ----------b -------c (CF) --d=b*c ---a-d 102.44 ----103.53 ---0.98 ---101.46 ---0.98 106.59 ----103.53 ---1.03 ----106.64 --(0.05) 98.38 -----103.53 ----0.95 ---98.35 ----0.03 Here, is...

I was reviewing few questions on the CTD, the solution provided for of them does not calculate the: =Quoted Bond Price - (Settlement price x CF) instead, it calculates what it called Adjusted Sport Price by: =Quoted Bond Price / CF and the lowest is selected as CTD I solved some questions...

Thanks David, so I'll think about it as: The number of Contracts = (Total Assets Value/Security Price) x Relation The first part of the above formula is intuitive and the Relation is Beta, Optimal Hedge Ratio, Tailing, Duration Based Ratio, etc. Another point is the selection of futures for...

There is an illustration by formulas in the books showing how the Optimal Hedge Ratio(OHR) is equal to Beta. I found the idea very confusing because OHR is used for hedging and Beta is a symbol of systematic risk and risk should be reduced always unless the return is increasing. Also, the...

Thanks David, I'll be waiting for that.

Hi David and thanks to both of you guys, Shakti, Since I don't have the practical experience, all I can do is to relay on the theory. So I categorized many practice questions into topics and sub-topics to search for pattern and look at the same issue from different angles. The exercise will...

Thanks Shakti, So I understand that if the question is asking about frequency of margin calls, then all we have to do is to calculate the difference between each day's price, and the accumulative gain/loss which is sometimes provided in the question or calculated in the provided answers of...

A sample question by me: Investor is long; Initial margin = 4, Maintenance margin = 2 Sunday price = 10 Monday price = 12 Tuesday price = 7 On Tuesday, should the investor pay a variation margin? I think the answer depends on whether the investor had taken out the profit from his account...

Is it soft copy or hard? Of course if it's hard, then it's going to take more time for shipping. There won't be enough time to study.