schroder's method and lease rates

[apparition]

heard someone talk about them.. are these in the course? could not find them in ASM 6th edition..

[Actuarialsuck]

Schroeder's is not.

[apparition]

thanks!

[backpocket9ball]

Originally Posted by apparition

heard someone talk about them.. are these in the course? could not find them in ASM 6th edition..

I could not find lease rates in ASM 6th ed. either. They are on the test, however, and are in McDonald.

It's related to the Claim on S^a material:

delta* = r - [a(r-delta)+.5a(a-1)sigma^2]

If a = 1, lease rate simplifies to r-delta.

[Actuarialsuck]

if a = 1, don't you just get delta from your equation?

[backpocket9ball]

Originally Posted by Actuarialsuck

if a = 1, don't you just get delta from your equation?

You're right, my mistake. The lease rate of an asset with a = 1, is the dividend yield.

[Actuarialsuck]

This is actually discussed in ASM I believe in Lesson 17. Abe goes through the cases for a = 0, 1, 2, -1 and 1/2.

[backpocket9ball]

Originally Posted by Actuarialsuck

This is actually discussed in ASM I believe in Lesson 17. Abe goes through the cases for a = 0, 1, 2, -1 and 1/2.

I don't have the manual in front of me, but for some reason I don't ever remember seeing the delta* (lease rate equation) and I saw no mention of the term lease rate, whereas in McDonald, this is all exlplicitly mentioned.

It's based on the same concepts as are the formulas for F, F^P, and E[S^T] (which ASM mentions), but delta* is still a term that I don't remember mentioned.

[Actuarialsuck]

Originally Posted by backpocket9ball

I don't have the manual in front of me, but for some reason I don't ever remember seeing the delta* (lease rate equation) and I saw no mention of the term lease rate, whereas in McDonald, this is all exlplicitly mentioned.

It's based on the same concepts as are the formulas for F, F^P, and E[S^T] (which ASM mentions), but delta* is still a term that I don't remember mentioned.

I believe you are right, he doesn't use that term.