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Hi Deepak, The Amazon gift card has no expiration date:) Thanks! Jayanthi

Thanks a tonne, Nicole. You can email the $15 Amazon gift card:) Jayanthi

Hi @arkabose, Just to let you know caps and floors are not covered in the Exam. I just flipped through the GARP Handbook and did not see it there. Maybe I am wrong! Would love to go through this question in detail - sounds very interesting. However, don't have the time. Look up Hull and Basu's...

Hi David, Thanks for taking the time to construct the above spreadsheet - I appreciate it:) (1) For the five year coupon bond: Like you, I get the Macaulay Duration = (1/100.16)*477.76 = 4.77. However, the Macaulay convexity = (1/100.16)*2586.07 = 25.82 and the Modified convexity = Macaulay...

Hi David, I have the following questions: (1) Will the FRM require us to apply equation (12.49) on page 226 to data such as those on Table 12-6 pg 223 of Tuckman for yield based convexity? (2) On time-weighting the Present Value in Table 12-6 by (t/2)*(t+1)/2, I get the convexity = 27.98...

Thanks David - I did do the numerical example on Table 12-6 page 223 of Tuckman to understand the computation of DV01 and Modified Duration. It is very intuitive. Also, the corresponding formulae of yield based DV01 and Modified Duration of zero-coupon bonds, par bonds and perpetual bonds are...

Thanks David - I did do the numerical example on Table 12-6 page 223 of Tuckman to understand the computation of DV01 and Modified Duration. It is very intuitive. Also, the corresponding formulae of yield based DV01 and Modified Duration of zero-coupon bonds, par bonds and perpetual bonds are...

Thanks for the star, Nicole - appreciate it:) Jayanthi

On closer examination, I do understand these equations on a very intuitive level. So long as I know the basic YTM equation, all I need to do is to make time-based adjustments and those that are needed for DV01 and Duration! Thanks:) Jayanthi

Hi David, I wanted to find out whether the FRM requires us to know equations of the type (12.34) and (12.35) for yield based DV01 and (12.36) and (12.37) for yield based modified or adjusted duration. I am not very good at differential calculus to arrive at these complicated equations. Will...

You are very welcome, Deepak:) Jayanthi

Hi Deepak, (1) I did calculate the value of the American put and got the same value as David and you: $5.856. As David said the question is indeed flawed - so that was good learning for me! The data on p and 1 - p was meant to confuse us - I agree:) (2) As far as I know, the...

Hi Nicole, Thanks a tonne - You can email me the $15 Amazon gift card:) Jayanthi

I am going to let David explain this!

Hi Deepak, My answer to your question was based on your data: "Marks view is that the stock price has an 80% probability of going up each period and a 20% probability of going down". David has often said that GARP gives you extra data to confuse you. Hope that answers your query. Thanks! Jayanthi

Hi Deepak, I would like to split up the answers into three parts: Part 1 - Valuing the six-month American put with S(0) = $50, K = $52, u = 1.2, d = 0.8, r(f) = 12% per annum. (1) There is no need to compute p and (1 - p) because they are already given, p = 0.8 and 1 - p = 0.2 (2) Value of the...

Yes. that holds true for all American options be it calls or puts! Thanks! Jayanthi

Thanks a lot, Nicole. Just received it:) Jayanthi

Hi Deepak, Your question is a classic case of the valuation of American puts since they can be exercised prior to maturity. On the first node, Price =e^-4%($3.63*0.321)=$1.119541 = $1.12 However, the intrinsic value at node 1 is $20 - $18.10 = $1.90 Hence the put can be exercised at node 1...

Will do. Thanks:) Jayanthi