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by: Kwan

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# Quantitative Financial Analysis Week VI Notes BU.230.710.52.SP16

Marketplace > Johns Hopkins University > Finance > BU.230.710.52.SP16 > Quantitative Financial Analysis Week VI Notes
Kwan
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VaR & Credit Derivatives
COURSE
Quantitative Financial Analysis
PROF.
Stuart Urban
TYPE
Class Notes
PAGES
2
WORDS
KARMA
25 ?

## Popular in Finance

This 2 page Class Notes was uploaded by Kwan on Thursday April 21, 2016. The Class Notes belongs to BU.230.710.52.SP16 at Johns Hopkins University taught by Stuart Urban in Spring 2016. Since its upload, it has received 33 views. For similar materials see Quantitative Financial Analysis in Finance at Johns Hopkins University.

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Date Created: 04/21/16
Quant  VI Thursday,  April  21,  2016 13:29 1. Midterm :  think-­‐-­‐>  10  min  to  alter  codes A: Start  with  lecture:  GeneratePaths/Get_call/Get_put ST:  log  normal  (already  in  codes) 1) T=100/250  (100  days  option  in  years) =  Mean(Path([201  401  601  801  1001])) for  loop  for  trajectories  (from  10  to  100,000);  vector  price;  disp 1  million  (X:  nonstop) 2) Expectation  in  MC-­‐  -­‐>  mean I  =  (sT  >  k); No  if  on  vectors! 3) Use  get_call,  _put 4) For  loop:  i,j,  k SEM  ==  0:  check  If  on  a  vector?&    k  for  for  loop  &  strike  price? B: 1) Maxes(1)=… Mean(maxes) 4) .*  or  & (k_lower  <sT)  <  k_upper 2. Lec:  Credit  Derivatives Assumption:  every  company  defaults  (1000  yr?) Default  possibility  as  given 2008:  correlated Pricing:  V==0 Assumption:  every  company  defaults  (1000  yr?) Default  possibility  as  given 2008:  correlated Pricing:  V==0 Different  hazard  rate  or  hazard  rate Correlation  -­‐-­‐ Gaussian  copula HW4:  3  companies  (different  cases) Correlation  Matrix  =  L  *  L (Lower  triangular  matrix) [1,  rho Rho,  1] =  [1,  rho;      Rho,  1] 1) Generate  us 2) Generate  default  times  (HW) 3) Get  the  last  payment  time:  mutually  exclusive  &  exhaustive  (4) 4) Is  default  before  maturity    (3) 5) PV  of  payoff  (simulated) 6) PV  of  payments   7) Spread  =  E[payoff]/E[payment] 3. Lec:  VaR 99%=1%:  confidence  level One-­‐sided NB.  pos End:  PPT  11

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