In the you tube video, Delta normal value at risk the VAR of a long call option for single risk factor of underlying stock price change has been calculated assuming delta to be constant. That means gamma has been assumed to be zero. Does this method have any practical use as in real life gamma...
Since ST follows log normal and LN(ST) follows normal distribution, so while calculating lower and upper limit for LN(ST), a Z score of 1.64 should be used as 1.64 is Z - score for 95 pc confidence level of a normal distribution. In the video ,You have used Z-score of 1.96 , which is...
As total asset of bank is $79 and critical thresh hold capital is $ 46, so S is 79 and K is 46. The answer given in (B) is d2 calculation. As d2 is the negative Z score of $46, n(d2) provides only the probability of total asset value($79) falling below d2($46), given a mean of .15 and SD of...
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