State price deflator

Discussion in 'CM2' started by Jeremy Lim, Aug 7, 2019.

  1. Jeremy Lim

    Jeremy Lim Member

    Hi admin,

    I would want to clarify if the state price deflator approach will no longer be tested although it still appears in the CMP.
  2. mugono

    mugono Ton up Member

    All text in bold text (core reading) is examinable. Otherwise it is not.
  3. Anna Bishop

    Anna Bishop ActEd Tutor Staff Member

    Hi Jeremy

    Although state price deflators haven't been examined for a while, they are still very much on the syllabus and in the Core Reading.

    They are most likely to come up in the context of the binomial model and that's where you should concentrate your efforts for deflators. They may also appear in a question on risk-neutral pricing so I would learn what's on the Summary Page (Page 31) of Chapter 17.

    Useful past exam questions on state price deflators to look at are:

    CT8 April 2005 Q10
    CT8 April 2007 Q3
    CT8 Sep 2011 Q7
    CT8 Sep 2013 Q6
    CT8 April 2005 Q8
    CT8 Sep 2009 Q5

    Hope this helps

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