306 Mathematics for Finance
M market portfolio
m expected returns as a row matrix
μ expected return
(N cumulative normal distribution
N
k)
the number ofk-element combinations out ofNelements
ω scenario
Ω probability space
p branching probability in a binomial tree
p∗ risk-neutral probability
P put price; principal
PA American put price
PE European put price
P ̃E discounted European put price
PA present value factor of an annuity
r interest rate
rdiv dividend yield
re effective rate
rF risk-free return
rho Greek parameter rho
ρ correlation
S risky security (stock) price
S ̃ discounted risky security (stock) price
σ standard deviation; risk; volatility
t current time
T maturity time; expiry time; exercise time; delivery time
τ time step
theta Greek parameter theta
u row matrix with all entries 1
V portfolio value; forward contract value, futures contract value
Var variance
VaR value at risk
vega Greek parameter vega
w symmetric random walk; weights in a portfolio
w weights in a portfolio as a row matrix
W Wiener process, Brownian motion
x position in a risky security
X strike price
y position in a fixed income (risk free) security; yield of a bond
z position in a derivative security