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  1. M

    Put Call Parity Question

    The value of the Australian dollar is $0.6. The Rf is 5%pa in the US and 10% pa in Aus. The market price of a Euro call option on the Aus dollar with a maturity of 1 year and a strike price of $0.59 is $0.0236. Find the price p of a Euro put option with a strike price of $0.59 and maturity 1 year.
  2. M

    Convexity Calculation

    Hi David, I was checking if both the formulas of convexity that I know lead to the same solution. I had posted this in another topic but am still confused. Could you please help me. There are 2 formulas for convexity that I used: 1. C = [ BV(2) + BV(1) - 2*BV(0) ] / BV(0) * (delta y)^2...
  3. M

    Key Rate Shifts

    Hi, So I was looking at the example in Bruce Tuckman where he explains Key Rate Shifts and as per his example we have: A semi annual payment mortgage to be retired in 30 years at a payment of 3250 per 6 months discounted at a 5% flat rate. This gives the PV to be 100,453.13 Now he says...
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    Convexity formula

    Hi, There are 2 formulas for convexity that I know: 1. C = [ BV(2) + BV(1) - 2*BV(0) ] / BV(0) * (delta y)^2 2. C = Summation of ( year number)^2 * Present Value of Cash Flow / Current Bond Value Now I did a question using both methods and got 2 different answers. Here is the question...
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    Jorion - Backtesting Questions

    Q1. How are they mathematically getting the values for k under the Basel penalty zone to go from 3 to 4 for a 250 day 99% CI when the number of exceptions goes from 5 to 10. Or is it something that has been set by Basel? Q2. There is an example in Jorion where they have found that when p =...
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    Dowd - Extreme Value Theory Questions

    Hi, I am studying EVT and noticed that the GEV distrib. for xi = 0 is given by: exp[ -exp (x-u/sigma) ] as given in Dowd. So when I translated that as: 1 / (e ^ ( e ^ z) ), I noticed that my solution for ln (p) is coming to : - ( e ^ z) - which is incorrect. As Dowd says that it should be - e...
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