Monte Carlo Simulation is a model that uses pseudo data created by computer simulation methods which allows us to understand the probabilistic behaviour of stock, commodities, etc. The Monte Carlo Simulation was initially used to create the atomic bomb, where the model was used to predict the possible movements of the hydrodynamics of the bomb.…
In modern finance, there are two fundamental questions every industry practitioner needs to answer: what is the return? And what is the risk? To be able to make sense of any financial strategy, one needs to first understand different kinds of yields on the market. The first and most commonly seen one is the Bank…
The Energy market has been extremely shaky in the past six months with a steep decline and the manifestation of some signs of recovery just in the last month. In particular, oil price has fallen by more than 40% since June when crude oil was trading at around 115$/barrel and had experienced years of stability.…
In recent weeks, economists at the World Bank and the International Monetary Fund, have suggested that within a year or two, India’s economy might be growing more quickly than China. Official statistics published on February 9th revealed that India’s GDP rose 7.5% on the year, compared to 7.3% in China. This follows 8.2% growth in the…
With oil price declining by more than 50% since June 2014, drilling companies had to take a decision whether to shut down their rigs or to continue drilling. The decision was based on the type of technology used by the rig and the region in which it was operating. We have to distinguish between Vertical…
For many of you do not already know enough about the finance world, it could be useful to learn more, I wish this article would be helpful for you. In 2015, the worldwide web has become the best source of information, and I propose the ten best sites about finance. With these sites, you would be able…
In one of his last Reports, Gustavo Reis, Economist for Bank of America, wrote that most of the countries in the world are old, indebted and with huge differences between classes. His opinion is that debt and deflation are the perfect prescription for weak growth of the Earnings/Economy ratio in the future. In particular, 70%…
Option traders use put-call parity as a simple test for European style option price model. If the parity doesn’t hold, then there is a mispricing somewhere, and investors can profit from it without taking on any risk (arbitrage opportunity). So how does put-call parity work? Let us take in consideration a portfolio composed of a…
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