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Yes, Nicole - I wanted the Amazon gift card. Thanks a lot again:) Jayanthi

Thanks Nicole - appreciate it - would like to redeem the prize now:) Jayanthi

Hi Deepak, This is a Binomial distribution - either he gets the correct answer or he gets the wrong answer. Probability of getting k options correctly P(Y = k) = [n!/((n - k)!*k!] * p^k * ( 1 - p)^(n-k) For this question k = 3, n = 5, p = 1/3 and 1 - p = 2/3 Therefore P(Y = 3) = [5!/(5! -...

Thanks for the star Nicole, appreciate it:) Jayanthi

Thanks for the star Nicole - appreciate it :) Jayanthi

Hi @wowps, The FRM Handbook for FRM Part I and Part II 2011 is written by Phillipe Jorion. No, you don't have to buy this book - the entire format since then has been revamped by GARP. It now consists only of readings by various authors. However, it serves as a great reference book for the...

Dear Mr Manikandan, As you rightly point out - Hull states that whenever Dn > K(1-e^(-r*(T-tn))), it is always advisable to exercise the option at just before the final Ex-dividend date tn. For the problem on page 69 above, this turns out to be $0.40 > $20*[1 - exp^(-0.1*(0.5 - 0.4167)] =...

Dear Mr Manikandan, Thanks for pointing out my typo. Yes, I just calculated the value for d1 and it turns out to be 0.3068. d2 then turns out to be d1 - sigma*SQRT(T) = .3068 - .25*SQRT(0.3333) = 0.16247 which is the same as the original d2 formula. Thanks for your clarification - appreciate...

Hi @QuantMan2318 Thanks for your detailed answer. I appreciate it. Conceptually, as far as the question on page 69 goes, I am clear about the value of the option being exercised just prior to the last ex-dividend date. However, I do not know how to use the DerivaGem software. I will calculate...

In page 68 of the same reference as above, I notice that value of d2 calculated by using the BSM formula: d2 = [ln(S(0)/K) + (r - sigma^2/2)*T]/sigma*SQRT(T) is different from d2 = d1 - sigma*SQRT(T) Is this because the stock pays dividends? Thanks! Jayanthi Sorry - the data for the problem...

Hi David, Given the following problem: Consider an American call option when the stock price is $18, the exercise price is $20, the time to maturity is six months, the volatility is 30% per annum, and the risk-free interest rate is 10% per annum. Two equal dividends are expected during the...

Hi Deepak, Looks like you have a miscalculation. Jensen's alpha here is: [10.3% - 2%] - 1.6[8.0% - 2.0%] = 8.3% - 9.6% = -1.30% So, the answer is no the portfolio did not outperform. Hope that helps! Thanks! Jayanthi

Thanks Brian - had to look it up too! Jayanthi

Hi Deepak, Tracking error is the standard deviation of the difference between the portfolio return and the benchmark return. You must compute the differences and then compute the standard deviation of these differences. Hope that helps! Thanks! Jayanthi

Thanks David - appreciate it! Jayanthi

Thanks Nicole - thanks for your prompt reply:) Jayanthi

Hi Nicole, Yes I would like to redeem the two $15 winnings in January and February together with today's winning. You can email the Amazon gift card to me today! Thanks:) Jayanthi

Hi Nicole, Thanks a lot! I would like to redeem the accrued $15 Amazon gift card. Jayanthi

Hi David, I have posted my question as a new thread because there is no associated Student Forum: The Binomial Tree in the third middle node has $39.6 as the stock price. I have redone the tree using $40 as the value in the third middle node. Isn't it conceptually wrong to have $39.6 instead...

Hi @arkabose, Thanks for your detailed explanation and the trouble you have taken to explain it in a systematic way. I appreciate it! At the outset, I must mention that I got a little thrown off by this question from the Hull text, since it has been grouped under David's Binomial Trees PQ set...