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Search results for query: Merton

  1. G

    Course Errors Found in 2021 Study Materials P1.T4. Valuation & Risk Models

    T4CH15 The Black-Scholes-Merton Model. Study notes page 19: w = N/(N+M) * c Page 12: aren't we assuming lognormal prices -> normal returns?
  2. David Harper CFA FRM

    Inconsistency in Stulz's BSM Equity Formula

    ..."which side" of the normal return distribution we are using; recall that the prices are lognormal such that the c.c. return is normal and this merton model is really just standardizing the normal return distribution about an expected future firm asset value. In all likelihood, both/all of...
  3. K

    Inconsistency in Stulz's BSM Equity Formula

    ...(ln(value of assets/face value) / (std dev asset returns) * T^.5) + (1/2)*(std dev)*T Also, the spreadsheet, cell E40 on the tab: "Stulz' Merton" has the variance being ADDED to the risk free rate in d1 (r + (variance of asset returns)/2) , but the study notes under "Calculate the...
  4. Nicole Seaman

    Course 2021 Part 1 New and Updated Published Materials

    ...Study notes updated 08/17/21 to v5 VRM-14 - Chapter 14. Binomial Trees Study Notes updated 8/17/21 to v3 VRM-15 - Chapter 15. The Black-Scholes-Merton Model Study notes updated 08/17/21 to v5 VRM-16 - Chapter 16. Option Sensitivity Measures: The “Greeks” Study Notes updated 8/17/21 to v3
  5. N

    Exam Feedback July 2021 Part 1 Exam Feedback

    ...a friend who had passed in 2015) was far more calculation-intense. For instance, not a single question on my exam related to the Black-Scholes Merton model, or the binomial tree method. Anyway, I am attempting to do early-bird registration to the November test, but I cannot register using my...
  6. Nicole Seaman

    P2.T9.21.12. Market timing measures

    ...and the aggregate contribution. Questions: 21.12.1. Bodie, Kane and Marcus explain, based on an analogy originally developed by Robert C. Merton, that we can attempt to quantify the value of market timing by recognizing that foresight is similar to holding a call option on the owned equity...
  7. R

    Exam Feedback May 2021 Part 2 Exam Feedback

    Agreed, was so surprised when calculation for the term structure model is model 1. I have expected a Ho-Lee or a vasicek. Merton and KMV also, was expecting they would at least test us debt = Risk free bond - put option of firm or the calculation of credit spread, but none of these appeared.
  8. R

    Exam Feedback May 2021 Part 2 Exam Feedback

    ...survival on an exponential function, joint survival probability etc. Ho-Lee model, Vasicek and CIR are all missing, and there are only 1-2 on Merton/KMV, but they are not calculation questions. As for the qualitative side, there are around 10-15 of those questions I have to choose an answer...
  9. I

    Exam Feedback May 2021 Part 2 Exam Feedback

    ...focusing mostly on calling up formulas like the "ULC" question at the far end of the exam - questions like the one from the mock exams on the Merton PD proxy, credit exposure pre/post netting etc. which required calculation and interpretation, where unfortunately rare); and (iii) partly...
  10. Nicole Seaman

    P1.T2.21.5 Monte Carlo simulation

    ...call option price (i.e., c_price_simple). The next section computes the call option price (i.e., c_price_BSM) according to the Black-Scholes-Merton (BSM) option-pricing model. The final section simply prints the three different call prices that were obtained earlier: c_price_MCS, and...
  11. U

    Determination of N(d1) and N(d2)

    Hi everyone! I have a question related to the BSM model. When we calculate N(d1) and N(d2), we’re using cumulative normal table(Z-table). but in this example it states that d1 = 0.1783 -> N(d1) = 0.5708 and d2 = 0.03688 -> N(d2) = 0.5147. Can someone explain why the results are different from...
  12. M

    Exam Feedback January 2021 Part 2 Exam Feedback (postponed 2020 exam)

    ...remember the following two questions? 1. Disadvantage of Credit analysis models (KMV only uses Debt and Equity, PCA used in regression, Merton is only for publicly traded debt) 2. Contract provisions the legal department suggests for outsourcing - I was sure that two answer choices were...
  13. E

    Merton model valuation

    Hi, I have a practice question (non-BT) related to the use of Merton's debt valuation model. An investor has a large position of bonds issued by XYZ Limited. He has hedged these bonds with equity using Merton’s debt valuation model. Suppose the value takes an unprecedented tumble, but the...
  14. S

    Exam Feedback October 2020 Part 2 Exam Feedback

    Hi, congratulations! just wanted to ask, what part of the BT curriculum did you focus on in your review part. I read Kaplan Swecher notes for part 2 but still don't feel very confident, I'm about to purchase BT to help me reinforce for my exam which is scheduled for Jan 16,2021 in Toronto. Just...
  15. V

    Exam Feedback October 2020 Part 2 Exam Feedback

    ...frontier, information ratio, current event, type questions. There were about 10 questions I had no idea. These include using the full merton model, and long novel drawn out questions and those governance/operational stuff. No idea. Zero. Just kinda looked through the choices and selected...
  16. Nicole Seaman

    Course 2021 Part 1 New and Updated Published Materials

    ...to fix formula error on page 8 VRM-14 - Chapter 14. Binomial Trees Study Notes updated 8/17/21 to v3 VRM-15 - Chapter 15. The Black-Scholes-Merton Model Study notes updated 08/17/21 to v5 VRM-16 - VRM-16 - Chapter 16. Option Sensitivity Measures: The “Greeks” Study Notes updated...
  17. T

    Exam Feedback October 2020 Part 2 Exam Feedback

    ...the PD is, whether it's marginal or conditional. Since there's not much information, I just used it as marginal. Netting Factor calculation Merton model for Equity value, where they give you the price of the debt and the FV. I used FV to calculate but didn't get the exact number. They give...
  18. G

    Exam Feedback October 2020 Part 2 Exam Feedback

    1- heavier tails 2- what was the Q/A for this? I don't recall coming across Liq adj duration. 5- I think I calculated Treynor as i thought it was supposed to be comparison with benchmark 12- what did you have for RAROC? Did you have to include transfer of 1.5%? 16- also said leverage for some...
  19. S

    Exam Feedback October 2020 Part 2 Exam Feedback

    ...given), such as PD, CET ratio, and 2 other parameters (I picked one of 2 others to be the answer) 17. Cyber-security 18. Drawback of LIBOR 19. Merton model 20. Ho - Lee model 21. Vasicek model 22. DV01 Hedge 23. Climate risk 24. ML/AI question 25. Marginal VaR 26. Posted collateral 27. CVA...
  20. N

    Exam Feedback October 2020 Part 2 Exam Feedback

    ...it was incredibly and unnecessarily convoluted. So much so that I could barely remember 5 or 6 questions after the exam ended. Regarding the Merton model question - I tested two ways, first I discounted 40 to PV and multiplied with N(d) value and subtracted it from 60 multiplied by N(d), no...
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