注册 登录
上一主题：Low Rates better than QE2/3?
下一主题：2012 Mock Morning Qn 38
返回列表 发帖
bchadwick

Rank: 3Rank: 3

UID
222250 
帖子
515 
主题
123 
注册时间
2011-7-2 
最后登录
2016-4-19 
1# 跳转到 » 倒序看帖
打印
tT
发表于 2013-4-22 07:27 | 只看该作者

CFA 2012 AM Mock: Q7 Derivatives

move, 2012, following, example, method
In the AM derivatives case they note the following:
Up Move on Stock 15%
Down Move on Stock 10%
I was under the impression that to calculate the down move you took the Up move 1.15 and take the reciprocal 1/1.15 = .8696
Therefore U = 1.15 & D = 0.8696
They are using U = 1.15 and D = 0.9 which is not the reciprocal. For every EOC and example in the text they used the reciprocal method…any ideas? These should be easy points for me and now I’m shakey on the easiest part…ugh!!

 

相关主题：

. Fixed Income【Reading 59】Sample

. Economics 【Reading 15】Sample

. FAS notes 76 example partB

. FAS notes 76 example partB

. 2012 Mock Questions Incorrect?

收藏 分享

LiquidAssets10

Rank: 3Rank: 3

UID
223239 
帖子
374 
主题
173 
注册时间
2011-7-11 
最后登录
2016-4-21 
2#
发表于 2013-4-22 07:28 | 只看该作者
Schweser uses that convention, but the CFAI text doesn’t really. If you can find an example in the CFA text on pricing of options using the discrete method, please let me know bc I haven’t seen it…

TOP

bdavi77962

Rank: 2

UID
223458 
帖子
310 
主题
9 
注册时间
2011-7-11 
最后登录
2014-8-7 
3#
发表于 2013-4-22 07:28 | 只看该作者
No its the magnitude of the up move they’ve given you there, i.e. in an up move the stock will go up 15%
To calculate the probability you have to use 1+r-d/ (u-d). This will give you the risk neutral probability of an up move. Down move is simply 1 - u since the probabilities have to equal 100%

TOP

spreads

Rank: 2

UID
223397 
帖子
276 
主题
21 
注册时间
2011-7-11 
最后登录
2014-8-7 
4#
发表于 2013-4-22 07:29 | 只看该作者
You’re right Cleo, but his question revolves around the size of the up move, not the probability. Ie, Schweser quotes the down move as 1 divided by the Up move, but this convention isnt really in CFA texts

TOP

prashantsahni

Rank: 3Rank: 3

UID
223226 
帖子
538 
主题
169 
注册时间
2011-7-11 
最后登录
2013-8-21 
5#
发表于 2013-4-22 07:31 | 只看该作者
another question on this item set - question 9
why dont you use 1.03^(60/365) when you are finding the up move and then ultimately discounting the option price??
i.e.   1.03^(60/365)  - .90  / (1.15 - .90)
thanks!

TOP

king_kong

Rank: 2

UID
222279 
帖子
254 
主题
62 
注册时间
2011-7-2 
最后登录
2014-6-28 
6#
发表于 2013-4-22 07:31 | 只看该作者
Diskopotato wrote:
Ok, for the exam I’ll use the magnitde of the up and down price movements on the underlying given in the problem.
Up move on stock 15%
Down move on stock 10%
So U=1.15 and D = 0.9 to caluclate the risk neutral probabilities. If I don’t get the right answer I’ll try it the other way…
Thanks for the responses
The reciprical method is only used when you are not given the down move.  If you are given a down move, then USE IT.  I’m guessing they would give us both.  One thing that you have to watch for is the time for the risk free rate,  on this one(or maybe a different one) I couldn’t come up with an answer because I didn’t adjust the risk free rate for being less than one period.

TOP

CFA4Techie

Rank: 1

UID
223374 
帖子
202 
主题
40 
注册时间
2011-7-11 
最后登录
2013-8-23 
7#
发表于 2013-4-22 07:32 | 只看该作者
Kzacca01…you do have to adjust the risk free rate!
Match the time period in the calculation of risk neutral probabilities as well as discounting in the binomainal tree

TOP

mkytz15

Rank: 2

UID
223375 
帖子
309 
主题
72 
注册时间
2011-7-11 
最后登录
2014-8-7 
8#
发表于 2013-4-22 07:33 | 只看该作者
You are abs right. I also found their solution wrong!
This is a clear bug/defect/error on the part of CFAI.  The risk free rate compounding should match the duration of that option, ie either it should be a 1 year option or it should be discounted for 2 months only
Do others disagree with me. I could not find a similar example in CFAI text

TOP

pawn

Rank: 2

UID
222256 
帖子
271 
主题
71 
注册时间
2011-7-2 
最后登录
2014-6-29 
9#
发表于 2013-4-22 07:34 | 只看该作者
this is why i am asking. the up/down move needs to be adjusted for time (60/365) as it says it is a 60 day option.. im almost sure of it.
this is what makes me think this type of question wont even be on the real exam as its too ambiguous…

TOP

返回列表
上一主题：Low Rates better than QE2/3?
下一主题：2012 Mock Morning Qn 38