Risk-free Interest Rates
For current interest rates on U.S. government bonds of different durations, click here. The rates on this page are simple interest rates. To convert simple rates to continuously compounded rates, use the calculator at the top left of the Retirement Risk Simulator. |
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Inflation Trends
To see the current trend in the inflation rate, click here. Look for the small image of the Annual Inflation Rate chart. Click on it. |
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Learn about Stock and Option behavior with Option Pricing— Black-Scholes Made Easy by Jerry Marlow
Every financial forecast is a probability distribution. Black-Scholes Made Easy gives you a sophisticated understanding of this core idea of continuous time finance. The book and simulator show you how— when you value a stock— you are valuing a probability distribution. They show you how an option forecast is the stock's probability distribution filtered through a strike price. They show you how to value an option's probability distribution and how to calculate your probability of profit. Order your copy of Black-Scholes Made Easy from amazon.com. |
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Implied Volatility Calculator
For each of your equity and option investments, the Retirement Risk Simulator requires that you enter a forecast of expected return and expected volatility. The easiest and perhaps best way to come up with volatility estimates for your financial forecasts is to extract implied volatility measures from option prices. Implied volatility is based, not on someone's subjective or biased opinion, but on the prices at which options actually trade in the marketplace. Hence, implied volatility measures represent market consensus views of likely future volatility. To go to an implied volatility calculator that provides step-by-step instructions, click here.
Alternatively, you can obtain short-term implied volatility estimates from http://www.ivolatility.com. |
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Use Excel to Calculate Historical Volatility and Correlations
The free book How to Use the Retirement Risk Simulator by Jerry Marlow shows you how to use Excel to calculate the historical volatilities and correlations of stock prices and equity indices. To download the Excel spreadsheets used in the examples in the book, click here. |
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Correlation of Other Investments to the S&P 500
You can obtain short-term coefficients for the correlation of other investments to the S&P 500 from http://www.ivolatility.com. IVolatility gives the correlations as percents. Be sure to enter them into the Retirement Risk Simulator as decimals, i.e., 86.76% becomes 0.8676. |
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Jerry Marlow
(917) 817-8659
jerrymarlow@jerrymarlow.com |
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