Forum / Vertiefungsmodule / Financial Management and Reporting
Financial Management and Reporting
Hi all! I think it would be nice&useful if we could post some questions and solutions concerning the Take Home Exams and Additional Exams of this course like we did in the topic for "Project and Enterprise Financing".
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Take Home Exam 1
Hi! In the take-home-exam-1 professor wants us to create a graphical presentation of the development of the underlying-price and the corresponding option-price for all time steps until maturity of the option.
Did I get it right, that he wants us to create dynamically a binomial tree in excel? Or does he want that we plot a function graph where we e.g. say that maturity is N=5 and that we plot how the valuation of the option (and the underlying price) would change for N=1 ... to N=5. And then we "simply" calculate the valuation of the option for N=1,2,3,4,5 and plot it (x-axis=N, y-axis=valuation) ???
..or how do you understand this question?
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I?m also not sure about the graphical presentation of the developement, but i thing he wants to see the binomial tree . For me it would make no sense to plot a diagram with all the possible developements.
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he wants to see the change of the option price according to the change of steps (the way you mentioned it before) and the binomial tree of the underlying, as well as the development of the option price. At least i did it like this...
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Hi,
I was trying to do the Take Home Exams, but I am having some unclear things.
Which formula do you use at the end for the Binomial model.
Im using: C0,0=P(delta t)*[p*C1,1 + (1-p)*C1,0] I was not sure how to calculate C1,1 and C1,0 and therefore I simply do the following: C1,1=max[S*u-X,0] and C1,0=max[S*d-X,0] I am also not sure how do we get P(delta t)... Im calculating P(T)=(1+r)^-(T), and I am using the same here... what is the difference between them...
Anyway I get 98,36365374 with the black-scholes model and 122,2891518 with the binomial model (n=1) when I simply use P(delta t)=P(T).
Can someone also put their results, so we can compare them?
Best, Diana
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i used the formulas from FMR_3-4 p63 to calculate u,d,C;; the formula for p is on page 60; P(T) is calculated as you mentioned before. but dont forget to take n in your consideration! (deltat=T/n!!!)
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perfect!so one last question:has someone found the same results for n=10 ---------- 2258 1058 1990.3 790.301(it shows error for this value i don't know why at all) 1753 and 553.818(also with error) etc etc..?
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Hi,
I was trying to do the Take Home Exams, but I am having some unclear things.
Which formula do you use at the end for the Binomial model.
Im using: C0,0=P(delta t)*[p*C1,1 + (1-p)*C1,0] I was not sure how to calculate C1,1 and C1,0 and therefore I simply do the following: C1,1=max[S*u-X,0] and C1,0=max[S*d-X,0] I am also not sure how do we get P(delta t)... Im calculating P(T)=(1+r)^-(T), and I am using the same here... what is the difference between them...
Anyway I get 98,36365374 with the black-scholes model and 122,2891518 with the binomial model (n=1) when I simply use P(delta t)=P(T).
Can someone also put their results, so we can compare them?
Best, Diana
Hi!
P(T) is not the same as P(deltaT). deltaT=T/numberOfSteps ... for example, if nrOfsteps=10 -> deltaT=1/10 (since T=1 year in our assignment.
I get exactly the same for the black scholes model. For the CoxRossRubinstein I get for nrSteps=1 -> optionValue=122,295848316128 and for nrSteps=10 -> optionValue=96,0196087144515
My CoxRossRubinstein-Results coincide with the results from this crr-online-calculator: Option Pricing Calculators by Peter Hoadley
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i found p(t) 0.99502 and pdelta t =0.9995….how about nrsteps2 ….i got 1278.35 138.704 1126.46 55.39 but somehow 1126 gives some error.. my option value is 96.012…i don't know what i make wrong ....
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Question about RISK MODEL MANAGEMENT
Hi! Has somebody done the Project1 (Credit Risk Models) Part B exercise c of the RMM homework?
The task is to generate a migration matrix out of a generator matrix. The generator matrix has one negative value in each row/column... I've implemented a transformation algorithm (gen.matrix -> migr. matrix) but my migration matrix always has some negative values in it due to the negative values in the generator matrix... Do you get negative values in your resulting migration matrix too?
PS: I know it's the wrong thread, just didn't want to open an extra thread for it.
Manuel @Manuel1991
Wirtschaftsingenieur... · Technische Universit...
As the name implies, these are only hedges of net investements you execute in foreign operations. For example you plan to buy a factory in the US in the future and you want to hedge the FX risk.