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    Financial Mathematics Formulas

    Uploaded by

    KhoaNamNguyen
    The document discusses various concepts related to discount rates and interest rates including: 1) Definitions of effective interest and discount rates for different time periods. 2) Relationships between interest rates, discount rates, and the force of interest over time. 3) Present and accumulated value calculations for annuities, perpetuities, and loans under simple and compound interest. 4) How discount rates are affected by inflation.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Financial Mathematics Formulas

    Uploaded by

    KhoaNamNguyen
    526 views5 pages
    The document discusses various concepts related to discount rates and interest rates including: 1) Definitions of effective interest and discount rates for different time periods. 2) Relationships between interest rates, discount rates, and the force of interest over time. 3) Present and accumulated value calculations for annuities, perpetuities, and loans under simple and compound interest. 4) How discount rates are affected by inflation.

    Original Description:

    Formulas for the course "Financial Mathematics"

    Original Title

    Financial Mathematics formulas

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    The document discusses various concepts related to discount rates and interest rates including: 1) Definitions of effective interest and discount rates for different time periods. 2) Relationships between interest rates, discount rates, and the force of interest over time. 3) Present and accumulated value calculations for annuities, perpetuities, and loans under simple and compound interest. 4) How discount rates are affected by inflation.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    526 views5 pages

    Financial Mathematics Formulas

    Uploaded by

    KhoaNamNguyen
    The document discusses various concepts related to discount rates and interest rates including: 1) Definitions of effective interest and discount rates for different time periods. 2) Relationships between interest rates, discount rates, and the force of interest over time. 3) Present and accumulated value calculations for annuities, perpetuities, and loans under simple and compound interest. 4) How discount rates are affected by inflation.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    Discount

     rate  as  function  of  interest  rate  

    Discount  function  under  compound  discount  

    Definition  of  effective  rate  of  interest  for  nth  period  

    Definition  of  effective  rate  of  discount  for  nth  period  

    Definition  of  force  of  interest  at  time  t  

    Effective  rate  under  simple  interest  

    Discount  (or  present  value)  factor  under  compound  interest  

    Real  rate  of  interest  in  presence  of  inflation  at  rate  r  

    Discount  (or  present  value)  factor  under  simple  interest  

    Accumulated  value  of  immediate  annuity  

     
    Present  value  of  immediate  annuity  

    Relationship  of  present  value  to  accumulated  value  

    Relationship  of  present  value  to  accumulated  value  

    Accumulated  value  of  annuity-­‐due  

    Present  value  of  annuity-­‐due  

    Present  value  of  k-­‐period  deferred  immediate  annuity  

    Present  value  of  increasing  immediate  annuity  

    Accumulated  value  of  increasing  immediate  annuity  

    Present  value  of  increasing  immediate  perpetuity  

    Outstanding  balance  of  level-­‐payment  loan  by  prospective  method  

    Outstanding  balance  of  level-­‐payment  loan  by  retrospective  method  

     
    Relationships  between  interest  and  discount  rates  

    Effective  rate  of  interest  

    Effective  rate  of  discount  

    Constant  force  of  interest  

    Present  value  of  constant  force  of  interest  

    Accumulated  value  of  constant  force  of  interest  

    Relationships  of  interest  

    Sum  of  geometric  progression  

    Present  value  of  perpetuity  immediate  

    Present  value  of  perpetuity  due  

     
    Present  value  of  decreasing  immediate  annuity  

    Present  value  of  increasing  perpetuity  due  

    Principal  payment  on  a  loan  

    Interest  payment  on  a  loan  

    Bond  pricing  formulas  

    Bond  price  between  coupon  dates  

    Stock  price  

    Forward  rate  

    Macaulay  duration  

    Modified  duration  

     
    Method  of  Equated  Time  

    What  to  Pay  

    Item   No  Dividend   Dividend   Dividend  yield    

    Prepaid  forward        

    Forward  contract        

    Sell  to  broker  at  the  bid  price  and  buy  from  broker  at  the  ask  price  

    Buy  asset  and  buy  a  put  =  floor  =  protective  put  =  buy  a  call  and  lending  

    Short  asset  and  buy  a  call  =  cap  =  purchased  put  and  borrowing  

    Covered  call  =  selling  a  call  and  owning  the  asset  =  selling  a  put  

    Covered  put  =  selling  a  put  and  shorting  the  asset  =  selling  a  call  

    Synthetic  forward  =  buy  a  call  and  sell  a  put  at  the  same  exercise  price  

    Bull  Spread  =  buy  and  sell  a  call  w/  sell  call  having  higher  strike  

    Bear  Spread  =  buy  and  sell  a  call  w/  buy  all  with  a  higher  strike  

    Box  spread  =  combo  of  synthetic  long  and  short  forwards  =  combo  of  bull  and  bear  spreads  

    Ratio  spread  =  buy  and  sell  unequal  numbers  of  options  at  different  strike  prices  

    Collar  =  buy  a  put  and  sell  a  call  with  the  call  strike  being  higher  

    Straddle  =  buy  a  put  and  a  call  at  the  same  strike  

    Written  straddle  =  sell  a  put  and  a  call  at  the  same  strike  

    Strangle  =  straddle  with  out-­‐of-­‐money  options  

    Butterfly  spread  =  written  straddle  and  strangle  

    Asymmetric  butterfly  spread  =  written  straddle  and  out-­‐of-­‐money  ratio  spread  

    Cash-­‐and-­‐carry  =  short  forward  and  buy  asset  

    Reverse  cash-­‐and-­‐carry  =  long  forward  and  short  asset  

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