Ho and Lee introduced the first no-arbitrage model of the evolution of the spot interest rate. Hu... more Ho and Lee introduced the first no-arbitrage model of the evolution of the spot interest rate. Hull and White extended this work to include mean reversion of the spot interest rate. When writing about the implementation of their model in discrete time, they have employed a search process at each date and forward induction to identify the level of interest rates in a trinomial lattice. We derive an analytical solution for the level of interest rates. We apply analytical
Introduction The traditional metric for measuring the richness of equity valuation since Graham a... more Introduction The traditional metric for measuring the richness of equity valuation since Graham and Dodd has been the price-to-earnings ratio (PE). (1) By definition, stocks with low PE ratios have earnings per share (EPS) trading at a discount compared with competing equities in the financial market. Discounted-cash-flow models suggest that firms with higher growth prospects and lower required rates of return should have their equity trade at larger multiples of earnings relative to equities with contrary characteristics. Thus, a comparison of PE ratios with various benchmarks has become a favorite tool for investors who desire a value-style of investing. In an attempt to modify the PE to account for the first of these factors, investors have standardized the PE ratio by the firm's growth rate, giving rise to a compound metric known as the PEG ratio. This ratio is now commonly reported alongside the PE and other relevant firm characteristics on many web-based financial news ser...
... the method and illus-trates its implementation by using it to calculate the val-ues of Americ... more ... the method and illus-trates its implementation by using it to calculate the val-ues of American-style arithmetic-average-price (Asian) options. ... Where the stochastic process of the underlying asset price or the partial dif-ferential equation (PDE) for the derivative asset makes ...
Ho and Lee introduced the first no-arbitrage model of the evolution of the spot interest rate. Hu... more Ho and Lee introduced the first no-arbitrage model of the evolution of the spot interest rate. Hull and White extended this work to include mean reversion of the spot interest rate. When writing about the implementation of their model in discrete time, they have employed a search process at each date and forward induction to identify the level of interest rates in a trinomial lattice. We derive an analytical solution for the level of interest rates. We apply analytical
Introduction The traditional metric for measuring the richness of equity valuation since Graham a... more Introduction The traditional metric for measuring the richness of equity valuation since Graham and Dodd has been the price-to-earnings ratio (PE). (1) By definition, stocks with low PE ratios have earnings per share (EPS) trading at a discount compared with competing equities in the financial market. Discounted-cash-flow models suggest that firms with higher growth prospects and lower required rates of return should have their equity trade at larger multiples of earnings relative to equities with contrary characteristics. Thus, a comparison of PE ratios with various benchmarks has become a favorite tool for investors who desire a value-style of investing. In an attempt to modify the PE to account for the first of these factors, investors have standardized the PE ratio by the firm's growth rate, giving rise to a compound metric known as the PEG ratio. This ratio is now commonly reported alongside the PE and other relevant firm characteristics on many web-based financial news ser...
... the method and illus-trates its implementation by using it to calculate the val-ues of Americ... more ... the method and illus-trates its implementation by using it to calculate the val-ues of American-style arithmetic-average-price (Asian) options. ... Where the stochastic process of the underlying asset price or the partial dif-ferential equation (PDE) for the derivative asset makes ...
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