Consider an ATMF straddle's price under lognormal and normal dynamics, and use the first central difference approximation

Question:

\[N^{\prime}(x) \times x \approx N(x / 2)-N(-x / 2)\]

to relate the normalized volatility to lognormal volatility

\[\sigma_{N} \approx \sigma \times F\]

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Mathematical Techniques In Finance An Introduction Wiley Finance

ISBN: 9781119838401

1st Edition

Authors: Amir Sadr

See More Books

Question Posted: Feb 27, 2024 03:11 AM

See More Questions

Let A, B be sets. Define: (a) the Cartesian product (A B) (b) the set of relations R between A and B (c) the identity relation A on the set A [3 marks] Suppose S, T are relations between A and B, and...
can someone solve this Modern workstations typically have memory systems that incorporate two or three levels of caching. Explain why they are designed like this. [4 marks] In order to investigate...
Portray in words what transforms you would have to make to your execution to some degree (a) to accomplish this and remark on the benefits and detriments of this thought.You are approached to compose...
Refer to the following lease amortization schedule. The 10 payments are made annually starting with the inception Of the lease. Title does not transfer to the lessee and there is no bargain purchase...
A company balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value...
On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT's retained earnings were $1,000,000. There was no acquisition differential. PAT accounts for its investment under the cost method. SAT...
A van traveling $60 \mathrm{~km} / \mathrm{h}$ has just passed through a thunderstorm that left a film of water $0.05 \mathrm{~mm}$ thick on the top of the van. The top of the van can be assumed...
Using the data in Table 10.2, a. What was the average annual return of Microsoft stock from 20022011? b. What was the annual volatility for Microsoft stock from20022011? TABLE 10.2 Realized Retum for...
How can natural selection and the concept of adaptive behavior be defined? 2. What are some basic ideas about human development proposed by evolutionary psychology? 3.Briefly discuss the...
Using the example in Figure 7.7 and the results in Table 7.5 (a) Show the computations for the $T_{1}$ discount factor curves in each of the $(u, d)$ states starting from the $T_{2}$ discount...
Using the Black's normal call formula (a) Show that the delta of a call option, $\partial C(0) / \partial A(0)$, equals $N(d)$. (b) Using put-call parity, compute the delta of a put option. (c)...
Which odds ratio indicates that the baseline group and the non-baseline group are equally likely to experience the outcome of interest? (a) 0.45, (b)1.00, (c)1.33, or (d) 2.05.
A solar panel with a power of 500 W/m2 has a surface area of 10 m2. The temperature of the outside air is 25 deg C and that of the atmosphere is 0\deg C. The convection coefficient is 20 W/m2K. The...
You are asked to serve on a jury. During voir dire, you're selected as Juror No. 45. The trial concerns a 24-year-old male accused of robbing a liquor store. Evidence is presented during the trial by...
If the rate of reaction in the sun were to increase, the surface temperature would increase. If the temperature of the surface of the sun were to increase by 300 K, estimate the percentage increase...
What is the associated 5 year annual return on the equally weighted portfolio of a) your 2 sector stocks, and b) a portfolio of your 2 stocks and one stock from the healthcare sector, and c) a...
How is an elevator meant to assist people with disabilities? Explain
Students should assume that they are partners in a bakery in St. Louis, Missouri, that specializes in exotic, expensive pastries. The business has grown quickly in its first four years, and now sells...
Comptech Ltd is a manufacturer of optical equipment. In September 2019, Ed Thompson the Chief Research Officer, attended a conference in Switzerland that focused on optical developments for the 21st...
Lets examine the labor force participation rates of teenagers. Using the FRED economic database ( https://fred.stlouisfed.org/ ), search for Labor force participation rate 16 to 19 years. Graph the...
Using the FRED economic database ( https://fred.stlouisfed.org/ ), find the Youth Unemployment Rate in the United States then click Edit Graph and Add Line and find the Youth Unemployment Rate for...
Overall, labor force participation rates have been declining in the U.S. economy but not for every demographic. Lets examine the labor force participation rates of teenagers and older people. Using...
Part I A. [20 Points] Using centered finite difference approximations as done in class, solve the equation: 1.045 d20 dx + 1.2Q = 0 subject to the boundary conditions shown in the stencil below. Do...
Given the below cumulative distribution function, find the following probabilities. CDF: 0 if 6 0.1 if 62 < 8 68 F(x)= 0.3 if 8 < <9 0.35 if 911 1 if 11 P(X=0)= P(X 8)= P(X <9) P(9 X 11) = P(6X9)...
A radio station antenna is 31 km away, 22 north of west with respect to an origin on a map. An office building is 37 km away, 36 east of north with respect to the origin. How far is the office...

Consider an ATMF straddle's price under lognormal and normal dynamics, and use the first central difference approximation

Question:

Step by Step Answer:

Mathematical Techniques In Finance An Introduction Wiley Finance

Students also viewed these Business questions