Can the calculation be detailed for the Alternative Approach on the Investment PDF Document (page 26). I do not see how the result for Variance of surplus could be 190.44 $ with the data provided.
This is indeed correct, d1 = (0.5*σ(M)*SQRT(T)) and d2 = d1-σ(M)*SQRT(T) = -0.5*σ(M)*SQRT(T) = -d1. Therefore, C = N(d1) - N(-d1) = 2N(d1)-1
Many Thanks again David for your help.
Hello,
Can you please explain how you arrive at the formula using the call option approximation for the market timing effect. I believe this formula appears at 20 minutes and 36 seconds after the start of the video. Thanks in advance for your help.
Hello,
Can you please provide the equation that should be used when we do have to calculate the Daily P&L Volatility of a two factors Regression Hedging (with the DV01 and Risk Weights).
Thanks in advance
Hi,
Can someone explain me what will constitute a risk management failure for unknown risks. In Rene Stulz paper "Risk Management Failures" an obscure statement reads the followings :
"The unknown risks represent risk management failures are risk that, had the firm's managers know about them...
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