How is upside for stock 15% and downside of 13% are obtained? I heard in Schweser video that it is not arbitrary calculation . Also I noticed downside factor calculated like this d= 1/1.15 =.869 But I saw in book d calculated as the following d=1-.13 = .87 Which is right way? I don’t think this equality of calculation is true all the time.
It’s TMV, do it the first way. I have no idea what you’re talking about in that first paragraph.
1 + 15% = 1.15 Reciprocal of 1.15 is downside
In volume 6, on page 219 problem 2, I saw following stock price can go up 10 percent or down 15 percent. According Schwser, u= 1.1 d = 1/1.1=.909 In the solution, they used d as follows d= 1-.15 = .85 Which is correct?
chinni234 Wrote: ------------------------------------------------------- > How is upside for stock 15% and downside of 13% > are obtained? I heard in Schweser video that it > is not arbitrary calculation . > > You might want to study John C Hull for the models which can be used for upside and downside move calculation > Also I noticed downside factor calculated like > this > > d= 1/1.15 =.869 > > But I saw in book d calculated as the following > d=1-.13 = .87 > > Which is right way? I don’t think this equality of > calculation is true all the time. No, idea about this one.