σμimplied vol · KKmax(S−K,0)udβρᵢⱼfat tailsPnL · drawdownyield · TdSₜ = μSₜ dt + σSₜ dWₜC = S·N(d₁) − K·e⁻ʳᵀ·N(d₂)σₚ² = wᵀΣwd₁ = [ln(S/K) + (r + σ²⁄2)T] ⁄ σ√T∂V/∂t + ½σ²S²·∂²V/∂S² + rS·∂V/∂S − rV = 0Sharpe = (Rₚ − R_f) ⁄ σₚVaR₉₉ = μ − 2.33σρ = Cov(X,Y) ⁄ σₓσᵧE[Rₚ] = Σ wᵢ·E[Rᵢ]φ(x) = e^(−x²/2) ⁄ √2πE[Rᵢ] = R_f + βᵢ(E[Rₘ] − R_f)dXₜ = θ(μ − Xₜ)dt + σ dWₜσ²ₜ = ω + α·ε²ₜ₋₁ + β·σ²ₜ₋₁C − P = S − K·e⁻ʳᵀΔ = ∂V/∂S Γ = ∂²V/∂S²p = (e^(rΔt) − d) ⁄ (u − d)rₜ = ln(Pₜ ⁄ Pₜ₋₁)E[Xₜ₊₁ | ℱₜ] = Xₜf* = (bp − q) ⁄ bz = (x − μ) ⁄ σP(N=k) = λᵏe^(−λ) ⁄ k!Θ = −∂V/∂Tν = S·φ(d₁)·√Tmin wᵀΣw s.t. wᵀμ = μ*∫Σ∂∞λ
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σμimplied vol · KKmax(S−K,0)udβρᵢⱼfat tailsPnL · drawdownyield · TdSₜ = μSₜ dt + σSₜ dWₜC = S·N(d₁) − K·e⁻ʳᵀ·N(d₂)σₚ² = wᵀΣwd₁ = [ln(S/K) + (r + σ²⁄2)T] ⁄ σ√T∂V/∂t + ½σ²S²·∂²V/∂S² + rS·∂V/∂S − rV = 0Sharpe = (Rₚ − R_f) ⁄ σₚVaR₉₉ = μ − 2.33σρ = Cov(X,Y) ⁄ σₓσᵧE[Rₚ] = Σ wᵢ·E[Rᵢ]φ(x) = e^(−x²/2) ⁄ √2πE[Rᵢ] = R_f + βᵢ(E[Rₘ] − R_f)dXₜ = θ(μ − Xₜ)dt + σ dWₜσ²ₜ = ω + α·ε²ₜ₋₁ + β·σ²ₜ₋₁C − P = S − K·e⁻ʳᵀΔ = ∂V/∂S Γ = ∂²V/∂S²p = (e^(rΔt) − d) ⁄ (u − d)rₜ = ln(Pₜ ⁄ Pₜ₋₁)E[Xₜ₊₁ | ℱₜ] = Xₜf* = (bp − q) ⁄ bz = (x − μ) ⁄ σP(N=k) = λᵏe^(−λ) ⁄ k!Θ = −∂V/∂Tν = S·φ(d₁)·√Tmin wᵀΣw s.t. wᵀμ = μ*∫Σ∂∞λ
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Calculus skill›Module 1 · Limits and derivatives›Topic 1.1·~35 minBeginner

Limits and continuity

Skill positionModule 1 of 4 · Topic 1 of 3
1.1 Limits and continuity
—Lab score— / 100Total XP—Streak—

What a limit says

A limit describes the value a function approaches as its input gets close to a point, even when the function is not defined at that point. We write lim⁡x→af(x)=L\lim_{x\to a} f(x) = Llimx→a​f(x)=L. Numerically you evaluate fff at points closer and closer to aaa, from both sides, and watch whether the values settle on one number.

lim⁡x→0sin⁡xx=1\lim_{x\to 0}\frac{\sin x}{x}=1x→0lim​xsinx​=1(1)

A function is continuous at aaa when the limit exists and equals f(a)f(a)f(a). There are three ways to fail: a hole (the limit exists but f(a)f(a)f(a) is missing or different), a jump (the left and right limits differ) and a blow-up (no finite limit). An overnight gap in a price chart looks like a jump: the closing price on one side and the opening price on the other do not meet.

  • Limit: the value f(x)f(x)f(x) settles on as xxx approaches aaa.
  • One-sided limit: the same, approaching only from the left (a−a^-a−) or the right (a+a^+a+).
  • Continuous at aaa: the limit exists and equals f(a)f(a)f(a).
  • Removable hole: the limit exists but the function is undefined or different at the point.
A limit by numbersTake f(x)=x2−4x−2f(x)=\frac{x^2-4}{x-2}f(x)=x−2x2−4​, undefined at x=2x=2x=2. At x=1.9,1.99,1.999x=1.9, 1.99, 1.999x=1.9,1.99,1.999 it gives 3.9,3.99,3.9993.9, 3.99, 3.9993.9,3.99,3.999; at 2.1,2.01,2.0012.1, 2.01, 2.0012.1,2.01,2.001 it gives 4.1,4.01,4.0014.1, 4.01, 4.0014.1,4.01,4.001. Both sides head to 4, so the limit is 4. Factoring confirms it: (x−2)(x+2)x−2=x+2→4\frac{(x-2)(x+2)}{x-2}=x+2\to 4x−2(x−2)(x+2)​=x+2→4.

Continuous compounding is a limit: (1+1n)n(1+\frac{1}{n})^n(1+n1​)n equals 2 at n=1n=1n=1, 2.5937 at n=10n=10n=10, 2.7048 at n=100n=100n=100 and 2.7169 at n=1000n=1000n=1000, approaching e≈2.71828e\approx 2.71828e≈2.71828.

Do not shrink the step foreverA computer keeps about 16 significant digits. If you try h=10−20h=10^{-20}h=10−20, then x+hx+hx+h is stored as xxx and the difference of two nearly equal numbers is pure rounding noise. Numerical limits and derivatives work best with a moderate step, around 10−510^{-5}10−5 to 10−810^{-8}10−8.

Lab · what's graded

  • A limit with a hole15 pts
  • Compounding by numbers15 pts
  • A famous limit10 pts
  • Close to the limit15 pts
  • Kinds of discontinuity15 pts
  • Continuous at zero10 pts
  • A step that is too small20 pts
0/ 7 answered
Tasks
1Numeric answer15 ptsNot answered

Find lim⁡x→2x2−4x−2\lim_{x\to 2}\frac{x^2-4}{x-2}limx→2​x−2x2−4​.

L=L =L=accepted: ± 0.001
2Numeric answer15 ptsNot answered

Compute (1+1n)n(1+\frac{1}{n})^n(1+n1​)n for n=1000n=1000n=1000 and round to 4 decimals.

(1+1/n)n=(1+1/n)^n =(1+1/n)n=accepted: ± 0.001
3Choice10 ptsNot answered

What is lim⁡x→0sin⁡xx\lim_{x\to 0}\frac{\sin x}{x}limx→0​xsinx​ (with xxx in radians)?

4Numeric answer15 ptsNot answered

Evaluate f(x)=x3−8x−2f(x)=\frac{x^3-8}{x-2}f(x)=x−2x3−8​ at x=2.001x=2.001x=2.001 and round to 3 decimals. Which number is it heading to?

f(2.001)=f(2.001) =f(2.001)=accepted: ± 0.001
5Match15 ptsNot answered

Match each function at x=0x=0x=0 to what happens there.

Pick the partner of each item on the left.

1x\frac{1}{x}x1​
x∣x∣\frac{x}{|x|}∣x∣x​
x2x^2x2
sin⁡xx\frac{\sin x}{x}xsinx​
6Choice10 ptsNot answered

Select every function that is continuous at x=0x=0x=0.

7Explain in words20 ptsNot answered

In two or three sentences, explain why evaluating a difference quotient with h=10−20h=10^{-20}h=10−20 gives a useless answer, and what step size is better.

Math modeKeyboard or LaTeX inputTask 1 of 7 · Ctrl ⏎ to check

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