Calculating Continuously Compounded Rates of Returns

Calculating Continuously Compounded Rates of Returns

Continuously compounded rates of return are widely used in financial markets, especially in the world of derivatives. In this video, Abdulla outlines the concept and provides some examples framed as investment returns.
Overview

Continuously compounded rates of return are widely used in financial markets, especially in the world of derivatives. They are typically useful when dealing with returns on assets whose price cannot fall below zero.

Key learning objectives:

  • Define continuous compounding

  • Calculate both the continuously compounded rate of return, and the future value of an investment

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Summary
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Expert
Abdulla Javeri

Abdulla Javeri

Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.

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