Just started studying out of ASM (lesson four currently) and I have a general question in regards to my approach to studying the manual. Should I get lost in perfecting the detail behind how each of these formulas are derived or just understand the big picture and concepts behind them? An example being how the formulas for u ,d and the annual volatility are developed with the binomial dist. Is it enough to understand where the formulas came from and having the ablity to use them or do I need to be ready to go back and derive these formulas in an exam setting? I ask because I think back to FM and all those questions about manipulating formulas for annuities and such in weird but interesting ways. It really helped to know the ins and outs on how those formulas were built.
Derivations of formulas
