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EMERGENCY HELP! Math EE


Uliana  Tokareva

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Hello,

EE is really a horrible time spending as I heard because it takes a lot from every student. I had been thinking for a long time which subject I would like to take: Economics, Math or Russian (all HL subjects). I choose Math because I love this subject and I thought that if I took something that I really enjoy, the process would be much easier. I consider it does not work with Math. My advisor helped me with choosing the topic:

"How effective is the Black-Scholes equation model in estimating the price of European-style options?"

And that's it. Here the whole help was ended because I made a decision too late (when everyone started writing a few days before the end of the year, I did not know the subject I was doing). I need to hand out the completed first draft by 3 September and I am in panic. If you can help me anyhow: resources, explanations or anything, I will be extremely happy. I have a seven in Math so I am not that stupid, as I might seem XD

 

 

Details: My teacher advised to look at the origin of this model and try to follow the pattern how the formula has been moderated to the needed equation, to try to solve the moderation myself in the EE, take other models in calculating options and compare their efficiency. I have researched a lot about the financial side of this topic such as definitions, theories but I have no material for writing EE in Math. I have graduated first year quite successfully : 38 out of 45 points and my teachers are predicting me 40-41 next year but I am thinking about dropping IB only because of EE. I am desperate.

 

P.s. my writing English is not excellent but I really hope there are out there kind people who could give me a hand (I am from Russia so if someone is willing to help in Russian, It is awesome)

 

Thank a lot. I will be excited to get any possible help at all.

 

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Hello,

EE is really a horrible time spending as I heard because it takes a lot from every student. I had been thinking for a long time which subject I would like to take: Economics, Math or Russian (all HL subjects). I choose Math because I love this subject and I thought that if I took something that I really enjoy, the process would be much easier. I consider it does not work with Math. My advisor helped me with choosing the topic:

"How effective is the Black-Scholes equation model in estimating the price of European-style options?"

And that's it. Here the whole help was ended because I made a decision too late (when everyone started writing a few days before the end of the year, I did not know the subject I was doing). I need to hand out the completed first draft by 3 September and I am in panic. If you can help me anyhow: resources, explanations or anything, I will be extremely happy. I have a seven in Math so I am not that stupid, as I might seem XD

 

 

Details: My teacher advised to look at the origin of this model and try to follow the pattern how the formula has been moderated to the needed equation, to try to solve the moderation myself in the EE, take other models in calculating options and compare their efficiency. I have researched a lot about the financial side of this topic such as definitions, theories but I have no material for writing EE in Math. I have graduated first year quite successfully : 38 out of 45 points and my teachers are predicting me 40-41 next year but I am thinking about dropping IB only because of EE. I am desperate.

 

P.s. my writing English is not excellent but I really hope there are out there kind people who could give me a hand (I am from Russia so if someone is willing to help in Russian, It is awesome)

 

Thank a lot. I will be excited to get any possible help at all.

 

Firstly, google for exemplary EEs. If I'm not wrong, there's a document floating around that shows you the best EEs for each subject. I'm sure there'll be several for maths. 

 

Next, narrow down your question. I don't know anything about the Black-Scholes model, but perhaps you could look at a particular point in time, or at a particular stock. Eg How effective was the Black Scholes model in estimating the price of <european company>'s price during the 2008 financial crisis? You could compare this with a period of financial stability, with other periods of recession, different companies, etc. I don't know much about stocks so I can't help you too much, but you get where this is going. 

 

Feels like it might venture out into economics or basically "non-maths" territory though, so you've gotta be careful. Of course, if it works as a proper economics EE, you might as well change it into an economics EE! Make sure you tell your supervisor, and find an econs supervisor though. Honestly, I advise all my juniors to go for an econs EE. Much more straightforward and easy to score marks. 

 

Finally, you should remember that if you really want to do this math EE, you will have to have a lot of math in it. Seems obvious, but many people treat it as a regular EE and write a long essay. You will have to do a lot of proving, calculations, etc. 

 

Really, get a hold of those exemplary EEs. 

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Thanks for quick answer. I will find the examples and I will talk to my teacher about narrowing. Unfortunately, I can't change to Economics back(in the most beginning I had EE in Eco) because our teacher sucks in helping or anything. She is extremely horrible in this and there is no other teacher in this discipline so I would end up even not passing.

Thank you very much

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Thanks for quick answer. I will find the examples and I will talk to my teacher about narrowing. Unfortunately, I can't change to Economics back(in the most beginning I had EE in Eco) because our teacher sucks in helping or anything. She is extremely horrible in this and there is no other teacher in this discipline so I would end up even not passing.

Thank you very much

 

I think the important thing though is making sure that it turns out a 100% Maths EE and not a Maths-Economics hybrid - because you would also end up not even passing if you fail to write it to the Maths criteria, and actually it might be worse getting the balance wrong because you're forced to write it in Maths than to have a rubbish supervisor. Not saying that you're going to do that, but it's just something you've got to keep constantly in mind to make sure you don't make the mistake of writing a Maths EE that isn't strictly mathematical enough.

 

Personally I would think about the sort of EE you really want to write - whether it'll be Maths or Economics - and even if your Economics teacher is hopeless, if it means you'll deliver a better EE that actually hits the mark scheme... then it's something you've got to balance out in your own mind. Supervisors for EEs can be helpful but they don't make or break an essay if they're useless. Obviously it's non-ideal to have a useless supervisor, but basically don't let it stop you from considering your choices carefully.

 

Good luck with it anyway!

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Thank, Sandwich but I am sure I am not capable of changing my subject already. I have always loved Math and I wanted specially in this subject and one thing that was stopping me is that Math is really hard compared to Economics for example. I am just confused with whole EE thing and I have no clue how to start.

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The big issue I'm seeing is really whether there's enough maths or not. A comparison of data lends itself to only basic statistical analysis and as already stated it's not exactly a maths EE.

Taking a derivation approach is a possibility, explaining the assumptions of the model and it's implications as you derive it, though I don't know about the difficulty. You could probably skip the solving of the PDE by plugging it in and verifying it is a solution, but a quick glance on Wikipedia suggests there's a fair bit of working to derive the equation itself.

Otherwise I'm not too sure, I unfortunately can't help you too much because I don't really understand the model and the financial theory behind it. In general though, it may help to pick a mathematical aspect of the model and work from there so it gives a clearer focus for the EE.

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