Moving on to MLC

Hey guys,

I am currently preparing for the MLC exam in November, and am taking a break from my financial mathematics blog to work on my YouTube channel with instructional life contingencies videos.  Good luck to everyone preparing for the FM exam, and feel free to check out my MLC videos at www.youtube.com/user/mlctutor.

Thanks and happy studying!
Tanne

"Long" and "Short" Options

This is how I think about the terms "long" and "short".  These can be a little confusing - they have more than one meaning, depending on what you're referring to.

"Long" and "Short" Options

Intro to Calls and Puts

Here is how I think about calls and puts.  I hope this description is easy for you to understand and remember.  Once you feel like you have a good grasp on what is happening, start practicing payoff graphs.  If you can quickly graph the payoff for written and purchased calls and puts, it will make all those option positions (stradles, strangles, spreads, etc.) much easier to remember!

Intro to Calls and Puts

Geometrically Changing Annuities - Part 1

Skip this video:  Geometrically changing annuities involve series of payments in which each subsequent payment increases or decreases by some percentage.

We want to be able to sum up these payments, either discounting or bringing forward with interest as necessary.

Prove to yourself that each of the three formulas shown in this video (minute 1:30) are equivalent, and that a geometrically increasing perpetuity is just a special case of a geometrically changing annuity (hint: it's the special case where n is infinity!).  What would happen if the annual effective interest rate were equal to the growth rate?

SOA Problems:

Sample:  14

November 2005:  8,9

Geometrically Changing Annuities - Part 2

Geometrically Changing Annuities - Part 3

Interest Rate Conversions

SOA Problems:

Sample:  3, 18, 41, 48

November 2005:  3, 7, 13

May 2005:  13

Present and Accumulated Value

Skip this video: If you can find the present value of a series of payments, you shouldn’t need any more formulas to find the accumulated value, and vice versa.  Value the series of payments at whatever point in time you like, and then discount or bring forward with interest as necessary.

Annuities Immediate and Due

Skip this video: Make sure that you can solve for an annuity-due by finding the annuity-immediate and adjusting for interest, and vice versa.

Decreasing Annuities

Skip this video: Prove to yourself that (Da)n is just a special case of the formula for an arithmetically changing annuity.

SOA problems:

Sample:  7

November 2005:  23

May 2005:  14

Increasing Annuities

Skip this video: Prove to yourself that (Ia)n is just a special case of the formula for an arithmetically changing annuity.

SOA problems:

Sample:  18

November 2005:  12, 14

May 2005:  9, 17, 20

Tip No. 1: Don't memorize (most) formulas!