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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Black Scholes Constant Implied Volatility

I hope someone can clarify my ideas about the constant implied volatility in the classical Black Scholes framework. As well known, market practitioners quote the prices of vanilla call and put options in terms of implied volatilities. For inputs…
A. Gi
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How do i solve compound interest questions like this?

How do i solve compound interest questions like this? Do I just use the compound interest formula directly? If I have lets say $500 in a savings account for 5 years and it earns 2.5% Annual equivalent rate compounded monthly. How much will I have…
john scott
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Discount factor problem.

We need to state whether the given statement is true or false : $$ v(t_2) = v(t_1)v(t_2 - t_1)$$ where $v(t)$ is the discount factor. I found it ti be true as $v(t) = (1 - d)^{t}$ where $d$ is the effective discount rate , so , $v(t_1)v(t_2 - t_1) =…
User9523
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Where the constant comes from in the Compound Interest formula?

I want to understand where the 1 constant comes from in the Compound Interest formula. I'm a programmer, I can find a logical way to calculate it using a programming language, this is a way I can actually understand: P = 6000 t = 12 interestRate =…
resmall
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Calculating asset returns by portfolio weights

I have a securities portfolio (Fixed Income) and corresponding information regarding the single issues weights (in %) in the portfolio, sector identifiers (i.e. Industrial, Retail) and Total Return quotes %) on a month-to-date basis (MTD). It looks…
Philipp
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annuity certain, financial mathematics.

A 20 year annuity certain provides payments of 200 at time 1 year, 180 at time 2 years , 160 at time 3 years, and so on until the payments have been reduced to $ 60. Payments then continue at 60 per year until the 20th payment has been made. The…
user294448
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Investment in a treasury bill

You invested 968 710 in a treasury bill with the face value of 1 000 000 with 91 days left till maturity. After 60 days you have the option to sell it for 989 250. Which option is more profitable? My solution: $$r_1…
ratrt13
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Does anyone know about Forced rate of interest and present value $v(t)$? Because it's confusing!

my notes doesn't explain these concepts well and I am very stuck at this example solution. I don't get where the numbers come from at all. Suppose that the forced rate of interest is $\delta(t)$ and is given by he following:…
John Trail
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Call/Put options for Finance

I'm working with put/call options for a finance class, and am having just a little bit of confusion with the formulae. For call options, I know that the formula to determine price (C(0)) is equivalent to C(t) = $\left(\frac{s^u -…
user3472798
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What is the function $\mathbb{1}_{[t_i,t_{i+1})}$?

Hello, I am wondering if anyone knows what is meant in the picture above, where it says $\mathbb{1}_{[t_i,t_{i+1})}$. I see it is some sort of function probably dependent on $t_i,t_{i+1}$ but it does not give me a definition of how it depends. I am…
Melba1993
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Equated Installment with Value Added Tax

I have calculated equated installments for credits using the following formula: Equated installments = (Interest * initial amount payment) / (1 - (1 + interest)^-number of periods) However, with the above formula I do not get the desired result to…
Amadeus Sanchez
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How do I find the rate (r) when I only have the Payment (Pmt), term (t) and financed amount (p)?

I know the simple interest formula is, $I = prt$, but I don't know the interest to be able to use that formula. Here's the variables. Please help me with the formula. $$p = \$92,000.00$$ $$t = 72 \text{ months}$$ $$ \mathrm{Pmt} = \$1461.00$$ $$r =…
SirOracle
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About the denominator in the future value formula

To get the present value of a stock that gives divined in the future we use the formula: P = Div+P1/1+r with P1 is the selling price of the stock after a period. So it's considering what you can get from the stock (dividend + market value) and…
user274094
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A problem involving compound interest and a system of equations

Kelly and Justin each win monetary prizes on the TV show US Icon. Kelly immediately deposits her money in an account paying 6.7% effective annual interest, while Justin immediately deposits his in an account paying 5.6% effective annual interest.…
CcS
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How to calculate higher monthly payment on term loan such that the last X months are paid at term minimum amount?

This one requires some explanation. What I want to do is calculate how much total monthly payment I would have to pay for x number of months on a loan to get the total balance down to where the loan will be paid off by paying ONLY THE MINIMUM…
TomT64
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