CP 351 Random Lists

Random lists or collection on information about items

Real world models

captures true underlying dynamics of price movements in simplified form, useful for projecting cashflows to assess tail risk and mitigation strategies, better for modeling decisions based on future economic conditions, simulate future economic paths realistically, discounted at risk free rate + premium, higher projected values in future

Risk Neutral models

not intended to give realistic probabilities or expected values, designed to replicate market consistent asset prices, useful when main concern is market consistent pricing, cashflows discounted at risk free rates, incorporates a term premium, lower projected future values than RW models, focused on pricing via replicated portfolios

hold

hold

hold

hold