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visit here,http://forum.bionicturtle.com/threads/merton-model-a-summary-of-the-issues.5646/ thanks

Hi Since the producer is short the bronze(he is selling the bronze in three months so he is short the forward/future) the underlying commodity, he should naturally long the futures of this commodity. He is not long the physical copper but is short as he is selling and not buying the copper in...

Hi, We need to discount the expected payoffs at the risk free rate r only and q does not enter here. q is associated with stock magnitude/value that is we reduce stock value from S0 to S0*e^-qt because the part of value of stock goes to paying dividends and this effectively reduces stocks value...

hi, do it as: let r be 1 yr forward rate starting today, (1+r)^1*(1+r3)^3=(1+r4)^4 =>1+r=(1+r4)^4/(1+r3)^3....1 r3 and r4 are 3 and 4 yr spot rates and from z-coupon bond price of maturity 4 yr P(4)=FV/(1+r4)^4 and price of maturity 3 yr is P(3)=FV/(1+r3)^3 thus P(3)/P(4)=FV/(1+r3)^3 divided by...

hi i think its a must have if you really want to understand the important concepts and examples in a better way. If you really want to understand/study and gain more learning then i think you must go for them. Videos are enough otherwise if money is really that important for you.But i think...

At the first place i shall tell you that hedge funds are usually and mostly illiquid. Like investment in private equity/ venture capital,real estate and certain other instruments which are illiquid. And i have talked and explained from this point of view. If the assets are liquid which is rarely...

Hi,[take sign of d/dx as a sign of partial derivative] The geometric brownian motion represents the change in stock price dSt as, dSt=drift(=mean)*St*dt+sigma*dz*St in a small time 't' stock moves by dSt according to GBM dz=e*sqrt(dt)=>dSt=drift(=mean)*St*dt+sigma*e*sqrt(dt)*St...1 From taylors...

Hi, The concepts is simple its this(according to my understanding): The illiquidity of hedge funds requires us to price them frequently as these funds does not trade in intermittent periods. As a result they do not have market available prices , so that hedge fund managers price these hedge...

I may suggest that you first go with the videos which will help you understand better as David explains beautifully and precisely. He explains the excel sheet examples very beautifully, and they are the best part of the videos. He takes a good coverage of the topic and provides explainations in...

working backwardly from the answer given .56=R^2 we assume then, 880.5/SSE+880.5 = .56 =>SSE+880.5=880.5/.56=1572.32=>SSE=1572.32-880.5=691.82 sqrt(SSE/n-k-1)=25.5 =>SSE/n-k-1=650.25 =>n-k-1=1.06 =>n-3-1~1 =>n-4=1=>n=5 which seems absurd since the numbers of observations are not just 5 but 24...

To prove it mathematically that zero coupon bond has less sensitivity to interest rate than coupon bearing bond, convexity of Z bond=C1 and convexity of coupon bond of same maturity and same discount curve=C2 we know that C1>C2...1 Duration of Z coupon bond=D1 and duration of coupon bond of same...

The market seems to have bottom out because when the market is bottoming out the relation of vega with the option price becomes negative. Because as the implied volatility becomes high as the markets goes bottom any increase in volatility(IV) will only decrease the price of the option as stock...

Hi i can give you two possible ways if you agree:) Vasicek model is, change in interest rate r= speed of reversion of r*(k-r(t))*small change in time t+ stdDev of r* random error term if you are taking the up and Down movements as speed of reversion of r*(k-r(t))*small change in time t delta t+...

Hi, 1) The market timing funds as said by you uses the strategy to switch between the treasury and the stocks. I mean whenever these positions are taken using futures. If there is a portfolio invested in treasury and portfolio manager thinks that market will go up(optimistic scenario) in near...

also see if this can help:Market efficiency and market equilibrium: An equilibrium model can only exist in the context of market efficiency. Studying market efficiency enables the way in which prices of financial assets evolve towards their equilibrium value to be analysed. Let us first of all...

What it means is that As true market portfolio is not observable its impossible to test this assumption of CAPM that the market portfolio is mean variance efficient.So its impossible to decide whether the market portfolio is efficient , hence the critique that this hypothsis of CAPM is still...

Hi, I would recommend to use the Teaxas BAII plus i have used it myself its been used all through for more than 2 yrs and have done numerous calculations and still working when i have used it for giving my frm and cfa exams. Its really very easy to use and provides all the financial...

hi I dont know about David,but As far as i know u dont need to memorise such tables. But just get an idea of what is what like risk weight is higher for BBB than AA etc. thanks

Among a set of Bonds that a dealer can deliver for a futures contract is the CTD or cheapest to deliver Bond. If CF is the conversion factor that dealer would use to get settlement price for the bond, then settlement price is the price at which the trade is settled which is Quoted price/CF...

Active return of portfolio is the excess portfolio return relative to the benchmark. Active return= portfolio return-Benchmark return,this can be positive or negative. Active Risk is the standard deviation of these active returns. That is how much portfolio returns are deviating from the...