Question 1

How can you compute theta?

Accepted Answer

Recall the Fundamental Pricing Equation:   We can compute the values for all the terms except the ∂V/∂t term, so allwehavetodois:

Question 2

When computing ∂V/∂r, what is the diﬀerence between "Central Approx- imation" and "Forward Approximation"? Which one is closer to the true value?

Accepted Answer

The Central Approximation is better because it averages the values of the Forward Approximation and the Backward Approximation.

Question 3

Using Monte Carlo Simulations, what steps do you need to follow in order to price a coupon bond?

Accepted Answer

Once you have simulated the interest rate path, discount the payoﬀ and take expectations.

Question 4

How can an interest rate process be simulated?

Accepted Answer

The answer of How can an interest rate process be...

Question 5

Why were range ﬂoaters so popular during the mid-nineties?

Accepted Answer

Because they appeared in a time where th

Question 6

Can the following equation

Accepted Answer

No, for many models we can't ﬁ

Question 7

How is a 95% conﬁcende interval deﬁned?

Accepted Answer

The answer of How is a 95% conﬁcende interval deﬁned?...

Question 8

What risks are involved in a range ?oater?

Accepted Answer

If the reference rat

Question 9

How can you increase the accuracy of the price given by the model when using Monte Carlo Simulations?

Accepted Answer

By increas

Question 10

How is the Risk Neutral process obtained?

Accepted Answer

The answer of How is the Risk Neutral process obtained?...

Question 11

There is a "Forward Approximation" and a "Central Approximation", is there a "Backward Apporximation"? How can you compute it?

Accepted Answer

Yes, the B

Question 12

What is the Feynman-Kac Theorem?

Accepted Answer

The answer of What is the Feynman-Kac Theorem?...

Question 13

What is a Monte Carlo Simulation?

Accepted Answer

A Monte Carlo Simulation is a methodolog

Question 14

What is a conﬁdence interval?

Accepted Answer

A conﬁdence interval is an int

Question 15

What is a range ﬂoater?

Accepted Answer

A range ﬂoater: i. pays higher

Question 16

What is a standard error?

Accepted Answer

The answer of What is a standard error?...

Question 17

Is the price obtained from Monte Carlos Simulations exaclty the same as the one obtained through an analytical formula?

Accepted Answer

No, when there is an analytica

Question 18

How can you compute gamma?

Accepted Answer

Theformula

How can you compute theta?

When computing ∂V/∂r, what is the diﬀerence between "Central Approx- imation" and "Forward Approximation"? Which one is closer to the true value?

Using Monte Carlo Simulations, what steps do you need to follow in order to price a coupon bond?

How can an interest rate process be simulated?

Why were range ﬂoaters so popular during the mid-nineties?

Can the following equation

How is a 95% conﬁcende interval deﬁned?

What risks are involved in a range ?oater?

How can you increase the accuracy of the price given by the model when using Monte Carlo Simulations?

How is the Risk Neutral process obtained?

There is a "Forward Approximation" and a "Central Approximation", is there a "Backward Apporximation"? How can you compute it?

What is the Feynman-Kac Theorem?

What is a Monte Carlo Simulation?

What is a conﬁdence interval?

What is a range ﬂoater?

What is a standard error?

Is the price obtained from Monte Carlos Simulations exaclty the same as the one obtained through an analytical formula?

How can you compute gamma?

An Introduction to Fixed Income Markets

Basics of Fixed Income Securities

Basics of Interest Rate Risk Management

Basic Refinements in Interest Rate Risk Management

Interest Rate Derivatives: Forwards and Swaps

Interest Rate Derivatives: Futures and Options

Inflation, Monetary Policy, and the Federal Funds Rate

Basics of Residential Mortgage Backed Securities

One Step Binomial Trees

Multi-Step Binomial Trees

Risk Neutral Trees and Derivative Pricing

American Options

Monte Carlo Simulations on Trees

Interest Rate Models in Continuous Time

No Arbitrage and the Pricing of Interest Rate Securities

Dynamic Hedging and Relative Value Trades

The Risk and Return of Interest Rate Securities

No Arbitrage Models and Standard Derivatives

The Market Model for Standard Derivatives

Forward Risk Neutral Pricing and the Libor Market Model

Multifactor Models

Filters

Exam 17: Dynamic Hedging and Relative Value Trades

How can you compute theta?

When computing ∂V/∂r, what is the diﬀerence between "Central Approx- imation" and "Forward Approximation"? Which one is closer to the true value?

Using Monte Carlo Simulations, what steps do you need to follow in order to price a coupon bond?

How can an interest rate process be simulated?

Why were range ﬂoaters so popular during the mid-nineties?

Can the following equation

How is a 95% conﬁcende interval deﬁned?

What risks are involved in a range ?oater?

How can you increase the accuracy of the price given by the model when using Monte Carlo Simulations?

How is the Risk Neutral process obtained?

There is a "Forward Approximation" and a "Central Approximation", is there a "Backward Apporximation"? How can you compute it?

What is the Feynman-Kac Theorem?

What is a Monte Carlo Simulation?

What is a conﬁdence interval?

What is a range ﬂoater?

What is a standard error?

Is the price obtained from Monte Carlos Simulations exaclty the same as the one obtained through an analytical formula?

How can you compute gamma?

An Introduction to Fixed Income Markets

Basics of Fixed Income Securities

Basics of Interest Rate Risk Management

Basic Refinements in Interest Rate Risk Management

Interest Rate Derivatives: Forwards and Swaps

Interest Rate Derivatives: Futures and Options

Inflation, Monetary Policy, and the Federal Funds Rate

Basics of Residential Mortgage Backed Securities

One Step Binomial Trees

Multi-Step Binomial Trees

Risk Neutral Trees and Derivative Pricing

American Options

Monte Carlo Simulations on Trees

Interest Rate Models in Continuous Time

No Arbitrage and the Pricing of Interest Rate Securities

Dynamic Hedging and Relative Value Trades

The Risk and Return of Interest Rate Securities

No Arbitrage Models and Standard Derivatives

The Market Model for Standard Derivatives

Forward Risk Neutral Pricing and the Libor Market Model

Multifactor Models

Filters