UECM2453 Financial Economics II
Tutorial 3
1
For a one-period binomial model for the price of a stock, you are given:
The period is one year.
The stock pays no dividends.
u = 1.433, where u is one plus the rate of capital gain on the stock per period i
UECM2453 Financial Economics II
Tutorial 1
1
Assume that the effective 6-month interest rate is 2%, the S&R 6-month forward price is
$1020. Suppose you buy the S&R index for $1000 and buy a 950-strike European put at
$51.777. Construct payoff and profit d
Input
Validation
Introduction
The main uses of data for an actuary are:
Setting premiums and/or contribution rates
Calculating reserves required to meet future liabilities
Preparing statutory returns to demonstrate solvency
Assisting with risk management
UECM2263: Applied Statistical Modeling Test 1
Question 1
(a) As someone who has Statistics background, how are you going to analyse the above given
data? List down as many techniques/steps as possible.
Solution:
Whenever possible, we try to express, or ap
UCCM2263/ UECM2263 Applied Statistical Models Test 2
Question 1
Solution:
(b)
(c)
Yes
No
X
X log10 X
160
(a)
or
120
60
80
100
y
140
X X
5
10
15
20
25
x
Yes
No
No
No
Y
60
80
100
120
y
140
160
180
200
Yes
5
10
15
20
25
x
or
Y Y
60
80
100
120
y
160
1
Y
140
1
UECM2263 Tutorial 5 Solutions to Selected Questions
Q1
Time plot
500
450
Sales
Yt
mean
400
MA(3)
MA(5)
350
300
1
(d)
2
3
4
5
6
7
Time
8
9
10 11
From the time plot, there is no trend and no seasonal factor.
Q2
Time plot
3000
Sales
2500
2000
1500
1000
500
1
UECM 2263 Applied Statistical Models
March 31, 2014
Group Project
Due Date: 31 March, 2014 (Monday, Week 12) by 4.00 pm
Remarks:
This project must be submitted by the due date. Late submission will result in mark reduction.
There must be at least 5 and no
2
UECM2263 APPLIED STATISTICAL MODELS
Formula Sheet:
di
ri
(1 )100% prediction interval computed in time
period t for Ft 1
ei
MS E
( Lt bt ) z / 2 MS E
ei
MS E 1 hii
Var ei
(1 )100% prediction interval computed in time
period t for Ft 2
2
1 hii
( Lt 2
Formula Sheet:
(1 )100% confidence interval for j
j t / 2; n k 1 se( j )
n
n n
n xi yi xi yi
i 1 i 1
1 i 1
2
n 2 n
n xi xi
i 1 i 1
r
t
t
F
S XY
S XX S YY
1 1
MS E
n xi y i xi y i
n xi2 xi
2
n y i2 y i
~ t ( n 2)
S XX
0 0
1 x2
MS E
n S
XX
Exam MFE/3F
Sample Questions and Solutions
#1 to #76
In this version, standard normal distribution values are obtained by using the
Cumulative Normal Distribution Calculator and Inverse CDF Calculator provided in
http:/www.prometric.com/SOA/MFE3F_calculat
Chapter 14 & 22
Exotic Options
Exotic Options
Nonstandard options
Exotic options solve particular business
problems that an ordinary option cannot
They are constructed by tweaking ordinary
options in minor ways
Some of the
dependent.
exotic
options
ar
Chapter 1 to 3
Chapter 9
Revision on
Financial Derivatives
&
Properties of
Options Prices
What are financial derivatives? What are
their roles in finance?
Give examples of derivatives and draw
their profit diagrams.
Name some financial derivatives that
Chapter 13
Market-Making
and Delta-Hedging
What Do Market Makers Do?
Provide immediacy by standing ready to sell to
buyers (at ask price) and to buy from sellers
(at bid price)
Generate inventory as needed by short-selling.
Their position is determined
UECM2453 Financial Economics II
Tutorial 6
1
You are asked to determine the price of a European put option on a stock. Assuming the
Black-Scholes framework holds, you are given:
The stock price is $100 and the strike price is $98.
The put option will ex
0.1
Common Terminologies
The Risk-neutral assumption is the assumption that one does not expect a premium for risk. For example, an
asset with defenite payo of 50 is priced the same as an asset with an expected payo of 50.
An option is said to be in the
MFE Notes - Spring 2010 Sitting
Lesson 1 - Put-Call Parity
Bull Spread: pays o if stock moves up in price
with Calls: buy CK2 and sell CK1 ; K1 > K2
with Puts: buy PK2 and sell PK1 ; K1 > K2
Bear Spread: pays o if the stock moves down in price
with C