Test Your Quantitative Finance Skills with This Challenging Stochastic Calculation Quiz!
Test Your Quantitative Finance Skills with This Challenging Stochastic Calculation Quiz!
kylie genner
Created 6/9/2024
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Put your knowledge of stochastic calculations in quantitative finance to the ultimate test with this extremely challenging practice quiz. See how many correct answers you can get out of 15!
1. In which year did Robert Merton introduce stochastic calculus into the study of financial markets?
1952
1969
1972
1985
2. What concept did Harry Markowitz develop that is fundamental to the theory of finance?
Equilibrium
Stochastic Calculus
Diversification
Martingales
3. Which of the following probabilities is associated with a European put option expiring at time three in the given binomial model?
V3(HHH)
V3(HHT)
V3(HTT)
V3(TTT)
4. What is the value of V3(TTT) in the given binomial pricing model?
0
3
4.50
5
5. Which theorem provides an efficient algorithm for computing the price of a European option in a binomial model?
Theorem 1.2.2
Theorem 1.3.1
Theorem 2.4.4
Theorem 2.3.2
6. What does the notation S_n represent in the context of stochastic processes?
Stock Price at Time n
European Option Price
Interest Rate
Up Factor
7. In Markowitz's theory, diversification is shown to minimize what?
Interest Rate
Risk
Stock Prices
Portfolios
8. In the given context, a call option at time zero has what initial value?
1.20
5
25%
0.1733
9. According to the context, which stochastic process is commonly used in continuous-time finance models?
Markov Processes
Martingales
Ito Calculus
Coin Tosses
10. What is the value of V1(T) when the stock price goes down in the given example?
1.20
2.24
0.3467
0.6827
11. Which property does Theorem 2.4.4 state about the stock price sequence in a risk-neutral measure?
Martingale
Arbitrage-Free
Volatility
Interest Rate
12. What are the up and down factors denoted by u and d used for in the binomial model?
Probabilities
Stock Prices
Forward Rates
Interest Rates
13. Which key concept did Shreve use to explain the computational aspects of derivative pricing?
Martingales
Risk-Neutral Probabilities
Coin Toss Space
Stochastic Volatility
14. How many possible outcomes are there for the stock price in the 100-period binomial model?
8
2100
1030
V100
15. In the binomial no-arbitrage pricing model, risk-neutral probabilities depend on which factors?
