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  #1  
Old 07-17-2007, 01:46 AM
leathercost leathercost is offline
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Default EOM Exercise

The EOM exercise has been released for a while. Anyone starts looking at the exercise and wants to discuss it?
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Old 07-17-2007, 02:12 PM
red red is offline
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I will take a look at it. Once I look, maybe we can discuss.
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Old 07-18-2007, 11:37 AM
red red is offline
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I have looked and am happy to discuss. Have you started?
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Old 07-18-2007, 12:50 PM
leathercost leathercost is offline
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Quote:
Originally Posted by red View Post
I have looked and am happy to discuss. Have you started?
Yeah.
I found task one is very obvious and shall take some time to have the spreadsheet done with those figures.
But for task two, I think it's a little bothered.
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  #5  
Old 07-20-2007, 10:23 AM
leathercost leathercost is offline
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Does anyone get 67.75 for the initial cost of hedge?
I also got -2.46 for the present value of hedge error for scenario 1 of RSLN model. In addition, I got 0 hedge error at maturity no matter which scenario and which model are used. That's little weird.
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Old 07-24-2007, 10:12 AM
red red is offline
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My numbers are pretty different. I haven't run all the scenarios through a macro yet to see where they all fall out, but the first LN, I have an initial hedge cost of 3.65 and an NPV of 38.88. Maybe we should walk through our calcs.
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Old 07-24-2007, 11:35 AM
leathercost leathercost is offline
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Quote:
Originally Posted by red View Post
My numbers are pretty different. I haven't run all the scenarios through a macro yet to see where they all fall out, but the first LN, I have an initial hedge cost of 3.65 and an NPV of 38.88. Maybe we should walk through our calcs.
What's your r and sigma for B/S model on a monthly basis?
Mine are
r = 0.5% and sigma = 5.2%.
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Old 07-25-2007, 04:35 PM
red red is offline
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Quote:
Originally Posted by leathercost View Post
What's your r and sigma for B/S model on a monthly basis?
Mine are
r = 0.5% and sigma = 5.2%.
I fixed my r and sigma and now get NPV of first scenario to be -1.53 and hedge cost looks like 53.88.

I wonder if my problem has to do with the mer=.25%. I know the problem talked about it being paid up front. Does that mean I should take the monthly fee * 24 out from the inital $1000 and start with $940?
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Old 07-26-2007, 02:06 AM
leathercost leathercost is offline
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Quote:
Originally Posted by red View Post
I fixed my r and sigma and now get NPV of first scenario to be -1.53 and hedge cost looks like 53.88.

I wonder if my problem has to do with the mer=.25%. I know the problem talked about it being paid up front. Does that mean I should take the monthly fee * 24 out from the inital $1000 and start with $940?
Agree with you. My previous results are based on that the management charges are paid at the BOM.

But after I modified so that the management charges are paid in advance at issue, my initial hedge cost comes to $68.36 and the PVHE is -$2.56. BTW, my d1 for year 1 is 0.3556.
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Old 07-26-2007, 01:31 PM
red red is offline
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Quote:
Originally Posted by leathercost View Post
Agree with you. My previous results are based on that the management charges are paid at the BOM.

But after I modified so that the management charges are paid in advance at issue, my initial hedge cost comes to $68.36 and the PVHE is -$2.56. BTW, my d1 for year 1 is 0.3556.
So we must be getting closer - I match your d1. my d2 = -.2136. Do you get that? My stock part of the hedge = -339.40 and bond = 320.82, so initial hedge cost = -18.58.
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