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    Testability of TSM (Term Structure Models)

    Good morning, In all of the term structure models, we have "dw" serving as a normal random variable, in which David recommends to use Norm.S.InV on that uniform random variable. I'm curious if anyone could provide how to prepare for this, given that there is a "randomization" factor in the...
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    CAPM Implications with MRP Negative - WACC Upper/Lower Bounds

    Theoretically, is it possible to have a negative MRP where the Risk free rate is greater than the Market return? I'm thinking of finding the upper and lower bounds for the WACC and the market return is unknown. Would the lower bound be where Expected Market Return equal to Risk Free Rate...
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    Basic Math Associated with Poisson Process

    In the following GARP 2020 Practice Exam question #65, we use the Poisson process for defaults at 1 and 0. 65. An analyst on the fixed-income trading desk observed that the number of defaults per year in the bond portfolio follows a Poisson process. The average number of defaults is four per...
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    Difference in GARP vs BT Binomial calculation of "u" and "d"

    Based on the binomial trees video you provided, we calculate the u and d with volatility as: However, in the 2019 GARP Practice Exam question #87 when calculation risk neutral probability it is simply 1+volatility an 1-volatility for u and d, respectively: Is there a reason for the logic...
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    Compute Delta

    We know that a non-dividend paying stock N(d1) is equal to that option's percent delta. Given that we can solve for d1 using an equation, how do we compute N(d1) to solve for delta on the exam?
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