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1. ### What are Parsimony Nontriviality in credit scoring models?

Could someone explain what is Parsimony and Nontriviality requirement in credit scoring model means?
2. ### N(d1) and N(d2) in Merton Model

Could some one explain to me how the N(d1) and N(d2) is computed in this question below? Let firm value (V) equal $1 billion with face value of debt (F) equal to$800 million. The debt is zero-coupon and matures in four years (T = 4.0). The riskless rate is 5.0%. The estimate of the volatility...
3. ### PQ-external Mean Reverting model of interest rate

Could someone help me with this question: Q: The Bureau of Labor Statistics has just reported an unexpected short-term increase in high-priced luxury automobiles. What is the most likely anticipated impact on a mean-reverting model of interest rates? A. The economic information is long-lived...
4. ### Delta-normal method to calculate VaR for Linear Derivatives

I would appreciate if someone could explain in layman terms what is the Delta-normal method. Also could someone explain how the following 2 positions are equivalent: 1. A 1 year forward contract to purchase pounds for dollar 2. A combination of 3 positions: a) A short position in a US...