Mathematics Stack Exchange
Mathematics Stack Exchange

Questions tagged [finance]

Questions related to the various aspects of financial mathematics. Topics include option pricing, arbitrage theory, market completeness and stochastic analysis.

Mathematical finance, also known as quantitative finance, deal with finance and financial markets in a mathematical manner.

Some examples of mathematical finance are the fundamental theorem of asset pricing which provides the conditions for a market to be arbitrage-free and complete, and the Black–Scholes equation, which uses partial differential equations to describe the price of an option over time.

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2637 questions
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Perpetuity Question with first payment period between payment periods and start.

An employer wants to pay 450 dollars every 6 months to a deserving employee forever. The company has $A to fund the award and can earn j2= 7%(interest compounded semi-annually). If the first award is to be paid out 3 months from now, what is A? i =…
Zain
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Calculate the Present Value of two loans

Your portfolio consists of two loans. A \$22000 loan due at the end of 8 years with interest at j52 = 3% and A \$42000 loan due at the of 11 years with interest at j12 = 6% Calculate the present value of this portfolio at the rate of j12=3.5% So for…
Zain
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How to work out the cumulative compound interest of something over a set period?

For example: If I want to get to a total of 1,500 in 30 increments. Each time the base value increases by 5%. For example Increment Value Total 1 10 10 2 10.5 20.5 3 11.025 31.525 ... ... ... 30 ... 1500 How do I work out what…
Toby Cannon
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Payoff of call and put options

I need to calculate the payoff from these 4 financial derivatives when the price of stock is $352.75 on the maturity date. Short a 9-month European call option on stock with a strike price of $388.03 Short a 9-month European call option on stock…
samkene123
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Help me find the implied monthly interest rate please

Your friend Zoe is planning to buy an outdoor patio set from a furniture store. The MSRP (the marked price) \$9600 and the seller offers a zero-interest financing plan which allows buyers to pay $400 per month over 24 months, starting one month…
ryka
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How do you calculate CAGR when the value of the end term is negative?

Trying to calculate CAGR = (end value/beginning value)^1/t - 1 Looking at company X's operating income from its income statement, it starts with a positive operating income and its end value is negative. Company X's operating income: 2020 =…
Robbie Roman
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Money-Weighted and Time-Weighted Rate of Return

I have a question on Time-Weighted Rate of Return (TWRR) and then a question on the links between MWRR and TWRR, An investor invested £100 in a fund on Jan 1st 1998 and another £100 on Jan 1st 1999. The following gives the price of a unit in the…
user4645
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Difference between Bi-annual and semi-annual in Financial Maths

I was wandering what the difference was between compounding interest when they use bi-annual and semi-annual and hence how to change your value of i I think semi-annual means twice in 1 year so your i would be i/2? and then you would multiply your…
Daniel Feinstein
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Early-exercise point of American Put

Could you please help me? In book Rüdiger Seydel "Tools for Computational Finance" in Chapter 4.5 "American Options as Free Boundary Problem" it is provided the following explanation for case $S>S_f$ , where $S_f$ is contact point: If $S>S_f$, then…
Mikhail Norshteyn
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How to restructure Compound interest formula (with regular contributions) to solve for the periodic payment amount

I need help restructuring this formula to solve for the payment PMT rather than the Total: $$ \text{Total} = \text{Compound interest for principal} + \text{Future value of a series} , $$ $$ \text{Total} = P \left( 1+\frac{r}{n} \right)^{nt} +…
jeffbartelli
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What is the difference between effective, real and nominal interest rate?

I have been somewhat confused in financial math when to change the rates and the difference between effective, real and nominal rates. I still am confused after searching on Google and asking the teacher, so I was wondering if anyone had a more…
isabeld99
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what is running yield?

Suppose an investor who pays £120 on 15 July 2007 for £100 nominal of a six-year stock with half-yearly coupon payments of 13% pa and is not subject to tax. The stock is redeemable at par. Calculate the running yield? I understood entire question…
amul28
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Price of dividend paying stock

Consider a dividend paying stock $S$ and suppose that its value just before a dividend payment of $D >0$ at time $t$ is denoted by $S(t−)$. The price after the payment should be $S(t)=S(t-)-D$? How can I justify that. Is there an arbitrage argument?
Alif
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Is there a formula to calculate future value with compound interest where only part of the interest of each period is applied?

Based on FV=C0*(1+r)^n Where C0 = Cash flow at the initial point (Present value) r = Rate of return n = number of periods Is there a way to adapt this formula to (1) In each period, only a% of the interest gained in that period remains in the sum?…
42piratas
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How do I convert from a semi-annual interest rate to montly?

On a practice exam I am given a $.06$ compounded semi-annually and need it converted to monthly. I assumed it would be $.005$ because it has annual percentage of $.06/12$ but my answer is slightly off so I wanted to have this verified
K. Gibson
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