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 Investment / Financial Markets Old Exam MFE Forum

#31
10-25-2008, 02:49 PM
 volva yet Note Contributor Join Date: Feb 2006 Location: Nomadic Studying for GHC/DMAC College: PSU '07 Favorite beer: Oskar Blues Old Chub Scotch Ale Posts: 4,948

I uploaded my 2nd draft with key updates in the Brownian Motion sections, the Equations Appendix and a new sub-section on Lease Rates and Claims under the last section, Exotic Options.
Attached Images
 MFE_10-25-08_E-book _draft 2 posted on AO_.pdf (524.4 KB, 3033 views)
#32
11-05-2008, 12:43 PM
 no driver Note Contributor SOA Join Date: Jan 2006 Studying for nothing! Posts: 2,351
Using your calculator to estimate volatility

ASM discusses finding the estimated volatility based on the sample standard deviation. It's good to know where the formulas come from but on an exam I'd rather leave the heavy lifting to my calculator because it saves a ton of time. Here's how to do it on the TI-30XIIS and the TI-30XS. I would assume you could get similar results from the TI-BAII+, but I haven't tried to use my BAII+ for anything other than TVM in a while.

TI-30XIIS:
[2nd][STAT]>[1-Var]
[DATA]
X1=ln(S1/S0)
...
Xn-1=ln(Sn/Sn-1)
[STATVAR]>[Sx]

TI-30XS:
[data]>[L1] (or whichever list you prefer)
L1(1)=ln(S1/S0)
...
L1(n-1)=ln(Sn/Sn-1)
[2nd][stat]>[1-Var Stats]
DATA: [L1]
FRQ: [ONE]
[CALC]>[Sx]

Annualized volatility is Sx*√units per year (365 for daily observations, 52 for weekly observations, 12 for monthly observations, etc)

If they ask an annualized volatility question based on observed data you can have an answer in no time.
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Exam FM Formula Summary (covers theory of interest formulas from the pre-2007 FM exam).
#33
11-05-2008, 04:57 PM
 J_Mo Member SOA Join Date: May 2007 Location: Iowa Studying for Exam C College: Wartburg College (Alumni) Favorite beer: Shiner Bock Posts: 237

Here are my notes for this session for what they are worth. "This session" is Fall 08 for potential future exam takers who make look at this - in case there are syllabus changes.

I left them in Word format so people can modify them to fit their needs, and fill in things they feel are missing. Due to my extensive use of the Word equation editor, I needed to split my formula reference into two files because of AO file size restrictions.

One note, while the McDonald text often uses C as a generic option descriptor in formulas, like the binomial tree formula for the value of at a node, I followed the convention of the manual that I used this sitting and use a V for option Value. That made sense to me, and avoids some potential confusion and "does this also apply for a put" questions, but is different than what the text and ASM use.

If you see anything else, let me know. I hope to not be taking MFE again, but like everyone else, I won't know for sure until January.
Attached Files
 MFE Notes 9-12.doc (186.5 KB, 2108 views) MFE Notes 13-24.doc (264.5 KB, 4616 views) Potential Theory Style Notes.doc (82.0 KB, 4143 views)
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#34
11-14-2008, 12:01 AM
 nate00000 CAS Join Date: Dec 2007 Studying for 3L Posts: 9

Quote:
 Originally Posted by colby2152 I uploaded my 2nd draft with key updates in the Brownian Motion sections, the Equations Appendix and a new sub-section on Lease Rates and Claims under the last section, Exotic Options.
Colby - The notes appear very impressive. I sat for FM earlier this week and am trying to decide what to take in May; I'm leaning toward MFE as there are some similarities to FM.
#35
02-02-2009, 12:14 AM
 cbrioso Join Date: Jul 2004 Posts: 8
Study Notes

You can visit my website. I am posting my study notes and solutions.
http://actuarialexams.synthasite.com/
Here`s a samples
Attached Images
 put-call parity.pdf (299.2 KB, 5863 views)
#36
02-03-2009, 09:34 PM
 GuineaPig Member Join Date: Sep 2006 Studying for ever Posts: 20,043

Quote:
 Originally Posted by colby2152 Fellow AO members helped me update some small errors in my original study guide. A brand new Spring 07 guide will be out by March.
I think i found an error in one of your formulas.

on the binomial pricing for the Jarrow/Rudd (or lognormal) alternative you have
$u=exp((r-\delta -.5\sigma^2)+\sigma \sqrt h)$

Shouldn't it be
$u=exp((r-\delta -.5\sigma^2)h+\sigma \sqrt h)$

Then the same applies to the d value (only -the sigma root h instead of plus)
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Quote:
 Originally Posted by Guerilla poster Rickson is right
#37
02-05-2009, 08:39 AM
 volva yet Note Contributor Join Date: Feb 2006 Location: Nomadic Studying for GHC/DMAC College: PSU '07 Favorite beer: Oskar Blues Old Chub Scotch Ale Posts: 4,948

Quote:
 Originally Posted by GuineaPig I think i found an error in one of your formulas. on the binomial pricing for the Jarrow/Rudd (or lognormal) alternative you have $u=exp((r-\delta -.5\sigma^2)+\sigma \sqrt h)$ Shouldn't it be $u=exp((r-\delta -.5\sigma^2)h+\sigma \sqrt h)$ Then the same applies to the d value (only -the sigma root h instead of plus)
That would be a typo. I took a look at my latest edition (Draft 3 - 10/29/08) and that error is not there.
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#38
02-05-2009, 11:30 AM
 GuineaPig Member Join Date: Sep 2006 Studying for ever Posts: 20,043

Quote:
 Originally Posted by colby2152 That would be a typo. I took a look at my latest edition (Draft 3 - 10/29/08) and that error is not there.
alright. I assumed it was a type but just wanted to make sure that it got corrected.
__________________

Quote:
 Originally Posted by Guerilla poster Rickson is right
#39
02-25-2009, 12:32 PM
 verbal_jint Member Join Date: Oct 2007 Posts: 32

Quote:
 Originally Posted by J_Mo Here are my notes for this session for what they are worth. "This session" is Fall 08 for potential future exam takers who make look at this - in case there are syllabus changes. I left them in Word format so people can modify them to fit their needs, and fill in things they feel are missing. Due to my extensive use of the Word equation editor, I needed to split my formula reference into two files because of AO file size restrictions. One note, while the McDonald text often uses C as a generic option descriptor in formulas, like the binomial tree formula for the value of at a node, I followed the convention of the manual that I used this sitting and use a V for option Value. That made sense to me, and avoids some potential confusion and "does this also apply for a put" questions, but is different than what the text and ASM use. If you see anything else, let me know. I hope to not be taking MFE again, but like everyone else, I won't know for sure until January.
i like this study notes the most! , thanks a lot for ur effort and sharing
#40
02-25-2009, 02:51 PM
 scotth Member Join Date: Jul 2008 Location: Palace in Nigeria Studying for A JOB! Posts: 1,000

Quote:
 Originally Posted by colby2152 That would be a typo. I took a look at my latest edition (Draft 3 - 10/29/08) and that error is not there.

I thought the latest was the 2nd edition? ... Post #31 (10-25-2008)

Can you post up the 3rd?