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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Discounted Value of Ordinary Annuity

Hello I tried to do the problem below, and I'm not sure where my calculations went wrong or my method was incorrect. I would like some assistance. An annuity pays 1000.00 weekly for 4 years and then 4300.00 weekly for the next 8 years. Determine…
IncognitoBatman
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Find the value of 10X

At a compound interest rate of $5 \%$ per annum, the accumulated value 3000 has the same accumulated value as deposits of 5X and 3X made at time t=0 and t=3, respectively. Find the value of 10X. This is what I did: $5X (1.05)^0 = 3000 \Rightarrow X…
Ami78
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Financial Math - Appreciation of a House. Help?

I need help figuring out where I went wrong. Question: Emily is purchasing a house for $185000 that appreciates at a rate of about 1.5% per year. She will finance this purchase with a 15-year mortgage at an interest rate of 3.9%, compounded…
helpmathme
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Finance Questions : Credit Card interest

Working through some problems on personal finance and this is the only set of questions I seem to not get a grasp on. I feel kind of like an idiot though for not being able to understand what to do. The payment due date being on December 8th is…
PiFarmer86
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Interest involving different years, but same or lower 2nd value?

When selling your property you receive the following offers : (a) € 100 000 on 1.1.18 and € 100 000 on 1.1.20 (b) € 150 000 on 1.1.18 and € 50 000 on 1.1.19 Assume interest is 3% Which offer is better? Now this is how I believe this should be…
Vanessa La
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Black Scholes Formula and continuous compounding

So i read that In the black scholes formula, the term Ke^-rt does a 'backward' calculation.. like if the strike price is 500 dollars, to be exercised t years from now, at r%, then this term calculates what the value is today (the current price) I…
Vanessa
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Find Loan Amount using parameters ROI and Tenure

I'm trying to find out Loan Amount taken for my 1-year old purchased bike from the bank. I know my EMI, ROI (Rate of interest) and Tenure. EMI = 2924, Tenure = 24 Months, ROI = 10.5% Note: This is Flat Rate not Diminishing interest rate. Please…
Mudassir Hussain
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Problem with deriving weights of a market portfolio in a mean variance framework

I paste a part of a paper that formulate the MV investment problem. I don't understand how equation 5 has been derived and, in particular, how the expected return on the zero beta portfolio comes up. Many thanks in advance for a reply.
user279687
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Mathematics of Finance

If you invest a dollar at “6% interest compounded monthly,” it amounts to $1.005^n$ dollars after $n$ months. If you invest 10 dollars at the beginning of each month for 10 years (120 months), how much will you have at the end of the 10 years? I…
Eric Brown
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Understanding the portfolio used in the derivation of the Black-Scholes PDE

In the derivation of the Black-Scholes equation, I see that a portfolio $\Pi=V-\Delta S$ is used, where $\Delta$ turns out to be $\frac{\partial{V}}{\partial S}$. But to determine $\Delta$, it is assumed to be constant. So my confusion comes from…
math111
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How is This Bank Splitting Apart it's Payment Distribution?

I have a credit card and I'm trying to calculate future interest charges per month. I have 4 months of statements that I have had to reverse engineer their math for. It took me a few days, but I finally figured out this banks algorithms for…
intwarrior
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Math behind figuring out variance impact to a weighted average cost/price per unit

I'm trying to figure out the correct methodology for analyzing price/mix variances and an impact on a weighted average price per unit (not your typical impact to sales or profit margin). In particular, I've found two calculations for Mix variance…
user628314
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Future value of lump sum - use years or months?

I'm trying to calculate the future value of a $1000 lump sum payment at the end of 12 years at 9% annual interest. I used this formula: FVn = PV * (1+r)^n. I got this result: $2812.66 = 1000 * (1+.09)^12. But the example I'm working from says…
Userq49874
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Payoff table for a top (short) straddle

Is the following table for a short (top) straddle correct? $K\equiv \text{Strike price}$ $S_T\equiv \text{Stock price at time T}$ \begin{array}{c|c|c|c} \text{Range of} & \text{Payoff} & \text{Payoff} & \text{Total}\\ \text{stock price} & \text{from…
Bernhard Listing
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Input Rates in Yield Curves

I‘m taking a course on interest rate modelling and we started talking about yield curves. We defined the discretely compounded zero rate curves, simple compounded zero rate curves, continuous compounded zero rate curves and continuous compounded…
Conny
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