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if 2 tree probaility ?
AFM
answered on 28-Jan-25 07:19
Sir if in this question if its 2 tree/ 2 years data given, then binomial method using the probabiilty right ?
latest answer
Yes
Hemachandra D
CA Final
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281
put period is 5 years
AFM
answered on 27-Jan-25 15:46
Sir Airbus can sell the business within next 5 years, so value of option should be based on t = 5 or becasue cashflows given for 30 years so using t = 30
latest answer
5 years - option can be exercised in 5 years
Hemachandra D
CA Final
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292
16.7 PV or NPV and what does answer 4.6192 means
AFM
answered on 27-Jan-25 15:22
Sir whether the given 16.7 million is PV of Cash Inflows or is that the NPV if thats PV of Cash flows 16.7, then NPV is 4.2 (16.7-12.5 ), we calulated value of option as 4.6192 So how does this Normal way NPV 4.2 vs compared with 4.6192 value of option the value of option we got greator is it because we have option to excercies any time in 15 years ?
latest answer
16.7 is PV Your understanding is right. Value of option at 4.6 is > NPV which is 4.2 imagine You have a buy call at 60 as strike and CMP is 57, value of option is intrinsic value + time value. Option value will not be just 3 It may 4 or 5 to account for time value Same logic apples here
Hemachandra D
CA Final
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271
Type of Option ?
AFM
answered on 27-Jan-25 15:13
Sir is this American Call Option kind ? as it can be excericesed anytime within 15 years
latest answer
Yes, but is not possible to value an AMerican call using BSM An American call is atleast most valuable than European. So at minimum value of european will be value of an american call
Hemachandra D
CA Final
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287
Slide 10 formula derivation
AFM
answered on 07-Feb-25 04:47
Sir since we are determining the sum of infinite terms of a GP, can we use the formula of Sn=a/(1-r), if we r using this the pv of coupon infinite is C/Y, is this boths amounts to different
latest answer
Same logic If there is coupon for a perpetual bond and no growth of coupon Process and formula of arriving at sum of infinite go is same right
Abhinav K A
CA Final
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395
Modified duration and convexity
AFM
answered on 26-Jan-25 14:33
Sir, Kindly advise on the following 1. Can we use modified duration % for calculating V+ and V- in the calculation of convexity? 2. Can we add convexity adjustment % to modified duration % to get an accurate price change %?
latest answer
1 Yes 2. Only if they ask you to use convexity or use words like price sensitivity compute convexity. Also consider No. of marks of the question before you compute convexity
Venkatesh S
CA Final
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389
Formula of PV
AFM
answered on 26-Jan-25 06:05
Sir I have attached the formula of PV under binomial method mentioned in the formula sheet it should be Cu and Cd, instead of u and d right ?
latest answer
Of call yes cu and cd
Hemachandra D
CA Final
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316
Contract quantity
AFM
answered on 24-Jan-25 21:09
Can the contract quantity be 3.931844 or should it be rounded. What is the market practice
latest answer
Market practice rounded off
Pradeep Malur
CA Final
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313
exponential calculation - normal calculator
AFM
answered on 24-Jan-25 08:51
Just wanted to know how to calculate the exponential function in normal calculator if the value is not provided in the question
latest answer
Pls go through calculator tricks video in introduction chapt
Pradeep Malur
CA Final
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422
No of Days
AFM
answered on 24-Jan-25 07:21
Sir in the earlier problems No of days you considered is by excluding either opening day or closing day, say in class problem 19, we considered from sep 15th to dec 15th as 16 +31+30+14 = 91 days, we excluded the last trading of december, and in ICAI material illustration 11, they have considered 58 days (excluding one day), so in exam if need to be done on days basis, then how to consider for futures purpose ?
latest answer
I explained how it works logically in real world Follow ICAI method for exam
Hemachandra D
CA Final
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258