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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How to determine the period of monthly payment having old and new price

We are a company providing a service for our clients monthly. Each our client has his own balance at our billing system. The current price of our service is 85 per month. If the balance of a client is for example -85, this means the client has 85 of…
stckvrw
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AirPoints and Credit Card Surcharge

Assune 1 AirPoints is equivalent to \$1. Assume for every \$100 spent on a particular AirPoints credit card, the credit card owner will earn 1 AirPoints If a vendor charged a 2% surcharge to use the credit card, then a \$100 purchase would become…
MathNewbie
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Problem with calculation of shares

Hey I am supposed to calculate the following problem: The investor chooses to buy shares of 4,000 dollars for which a dividend of 30dollars is paid quarterly or to purchase government bonds for 60,000 dollars, which will increase by 10 years to…
user714814
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How to find simple interest for specific year?

Principle = 49000; Rate of Interest = 57 1/7%; Time = 5 yrs; I need to find SI of 2nd year = ? My Try: R = 57 1/7% i.e 4/7 which means Interest/Principle. Principle; 7 corresponds to 49000 (given).
Edward Smith
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should we just derive both the put option equation and the call option?

under these assumption The Black-Scholes assumptions below are made in this problem: (1) calls and puts are European style; (2) both the call and the put share the same underlying, which is none-dividend paying; (3) expiry ܶstrike ܭ ,and interest…
user676367
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How can I explain why simple interest > compounded interest for p<0

Given these formulas for calculating interest (yearly): Simple = Pr(days/365) Compounded = P((1+r)^(days/365)-1) P = Principal r = Interest rate For an investment of 50000 and a yearly interest rate of we can plot the difference between these…
Niels Bosma
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Calculation of price of rent

I am solving the following problem: The owner has premises that he decided to rent. Rental costs for the first year are 1000 and each year costs increase by 5% for 5 years. How much rent should be agreed with the customer to cover all costs? My…
user714814
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Mathematics in Finance (Annuity in arrears)

So, I am trying to figure out how to formulate this question. Q: Alex and Anna each need £10 per week to live on. They decide to ask their dad for a weekly allowance. Alex agrees that she will receive £10 each week for one year (52 weeks). Anna…
Mathsnovice
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Bond worth given yield to maturity

On 18 February 2010, the bonds were issued with a face value of $\$1,000$. The bonds mature in 15 April 2015 and have an annual coupon rate of $6\%$. (a) Assuming today is 15 April 2013, how much is the bond worth if its yield to maturity (YTM) is…
user51462
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Am I using the simple interest formula correctly?

Sally has inherited a land that was purchased for $30,000 in 1960. The value of the land increased by approximately 5% per year. What is the approximate value of the land in the year 2017? The answer is $484,000. I tried using the simple interest…
orangebull
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Continuous compounding and annual contributions

I have to find a formula for a problem that involves yearly continuous compounding at 2% with annual contributions of 5000$. We know y(0)=0, so there is initially no money in this account. Let FV= Future value, n= number of years that have passed,P=…
Alex.G
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The following is the Black-Scholes formula for the value of a call European option:

The following is the Black-Scholes formula for the value of a call European option: $$ C(s) = N(d_1)S-N(d_2)K $$ $$ d_1 = \frac{1}{\sigma \sqrt{T}} \left[ \ln{\frac{S}{K}}+ \frac{\sigma^2}{2}T \right] $$ $$ d_2 = d_1 - \sigma \sqrt{T} $$ where $N$…
rohan
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Neftci's An Introduction to the Mathematics of Financial Derivatives, 2.10 exercises, 1

Having some difficulties with Neftci 2.10, first exercise. Under the assumption that there is no arbitrage, we should have: $$\begin{bmatrix} 1 \\ 280 \end{bmatrix} = \begin{bmatrix} 1.0125 && 1.0125 \\ 320 && 290 \end{bmatrix} \begin{bmatrix}…
Naz
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Compound interest with annual contributions

June wishes to plan for her retirement and decides to invest 1000 dollars a year into an RRSP starting age 18 until age 30. After 30, she no longer contributes any money but leaves in her RRSP until age 65. Jas on the other hand, contributes 1500…
user612996
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Buying stock at discount yields unintuitive rate of return

My employer offers an Employee Stock Purchase Program (ESPP). Long story short, worst case scenario is that they will purchase stock on my behalf at a 15% discount and then I will immediately sell it. I am confused as to why my gain is 17.65% as…
Adam Hill
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