Replicate the GARCH(1,1) estimation in Example 24.2, using daily returns from on IBM from January 1999 to December 2003. Compare your estimates with and without the four largest returns.
Answer to relevant QuestionsUse the following inputs to compute the price of a European call option: S = $100, K = $50, r = 0.06, σ = 0.30, T = 0.01, δ = 0. a. Verify that the Black - Scholes price is $50.0299. b. Verify that the vega for this option ...Verify that the price of the 12% interest rate cap in Figure 25.6 is $3.909. Using Monte Carlo, simulate the process dr = a(b − r)dt + σdZ, assuming that r = 6%, a = 0.2, b = 0.08, φ = 0, and σ = 0.02. Compute the prices of 1-, 2-, and 3-year zero-coupon bonds, and verify that your answers match ...Consider two zero-coupon bonds with 2 years and 10 years to maturity. Let a = 0.2, b = 0.1, r = 0.05, σVasicek = 10%, and σCIR = 44.721%. The interest rate risk premium is zero in each case. We will consider a position ...Assuming a $10m investment in one stock, compute the 95% and 99% VaR for stocks A and B over 1-day, 10-day, and 20-day horizons.
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