T
Turtlelord
Member
Opinions on the CT8 September 2012 paper.
I was disappointed it had pretty much no stochastic calculus questions.
I was disappointed it had pretty much no stochastic calculus questions.
My main gripe was the 20% reduction = 1/1.2 in the binomial tree question (3, was it?). How something like that gets reviewers I'd love to know.
What do you mean?
I think there was a mistake with the implied volatility question.
Does anybody know what happens if there is a mistake in the exam?
I think there was a mistake with the implied volatility question.
My main gripe was the 20% reduction = 1/1.2 in the binomial tree question (3, was it?). How something like that gets [past] reviewers I'd love to know.
Question 1 was basically "do you have an intuitive understanding of what risk-neutral probability means". To do part (i), you're looking for the probability q that makes the expectation of the portfolio equal to the risk-free rate (ie solve
r = q*r_a + (1-q)*r_b
At least, I hope that's right!