If you would like to receive 100 units of money each year for 20 years (for, say, a retirement package), you need less than units to start with, because interest is paid (and compounds) over the sum that will be paid to you later. The amount needed can be computed by the annuity function. The following shows the result for an interest rate of 4%.
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In order to model stock prices and volatility, financial modelers use many variations of different stochastic processes. One of these is the Merton Jump Diffusion process, demonstrated below. We generate 5 realizations of a particular Merton Jump Diffusion process.
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