21-270
Introduction to Mathematical Finance
Week #8 Solutions
Spring 2011
1. [Exercise 3.5] Let F0 = 285 be the forward price that has been agreed before and let
F1 = 275 be the todays forward price f
21-270
Introduction to Mathematical Finance
Homework #1
Spring 2011
Problem 4 is due in class on Wednesday, January 19.
1. Assume the following exchange rates are valid:
1 US Dollar = 0.68
1 US Dollar
21-270
Introduction to Mathematical Finance
Homework #5 Solutions
1. [Exercise 2.18] Let =
Spring 2011
1
1+
rI [12]
12
. Then from the formula for the sum of monthly payments
we get 200, 000 = 1, 310.
Course Notes for Introduction to Mathematical
Finance (21-270)
William J. Hrusa & Dmitry Kramkov
Department of Mathematical Sciences
Carnegie Mellon University
Pittsburgh, PA 15213
January 25, 2015
2
21-270 Introduction to Mathematical Finance
January 11, 2016
Instructor: Dr. David Handron
Oce: Wean Hall 6214
e-mail: [email protected]
TAs: David (Huck) Gutman, [email protected]
Billie Ch
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Chapter 2
Fixed-Income Securities and
Interest Rates
We now begin a systematic study of xed-income securities and interest rates. The
literal denition of a xed-income security is a nancial instrument
21-270
Introduction to Mathematical Finance
Homework #4 Solutions
Spring 2011
1. [Exercise 2.8]
mN
4, 000 =
i=1
mN
1, 100 =
i=1
Since
10
i=1
i
50D( 2 ) =
i
AD( ) =
m
10
i=1
q[m]
i
F
D( ) + F D(N ) =
m
21-270
Introduction to Mathematical Finance
Week #11 Solutions
Spring 2011
1. [Exercise 3.13] (a) By put-call parity P0.5 =$ 2.9595. Therefore the amount of extra cash
is 10, 000 (C0.5 P0.5 ) = $75, 3
21-270
Introduction to Mathematical Finance
Week #13 Solutions
Spring 2011
1. [Exercise 5.1]
1. The payos from the call are $50 and $0. Risk-nuteral probabilities are
u1r
1
. Thus, C0 = 1+r (50 1+rd +
21-270
Introduction to Mathematical Finance
Week #12 Solutions
Spring 2011
1. [Exercise 4.5]
(1) the event of the occurrence A and B simultaneously contains the following sequences=cfw_HHT ,
HHT with
21-270
Introduction to Mathematical Finance
Homework #11 Solutions
Spring 2011
1. [Exercise 5.13]
i
(i)Using the fact that S0 =
1
[S i ]
1+r 1
we have the following system to solve:
1
(25 p1 + 50 p2 +
21-270
Introduction to Mathematical Finance
Week #10 Solutions
Spring 2011
1. [Exercise 3.6] Using Put-Call Parity we have:
P0 C0 = D(T )(K F )
and we deduce from it
K = (9.11 6.85) 1.1 + 296 = 298.49
196
Part 2 Interest Rates and Valuing Cash Flows
Chapter 6 APPENDIX B
The Yield Curve and the Law of One Price
Thus far, we have focused on the relationship between the price of an individual bond
and