We know Variance = (Std deviation )^2 Now , (14.40)^2 = (0.3*20)^2 + (0.7*12)^2 + 2*0.3*0.7*Covariance, solve for Covariance which will be equal to 240 or 0.024. I hope you know the formula for the variance of the portfolio.
We know Variance = (Std deviation )^2
Now ,
(14.40)^2 = (0.3*20)^2 + (0.7*12)^2 + 2*0.3*0.7*Covariance, solve for Covariance which will be equal to 240 or 0.024.
I hope you know the formula for the variance of the portfolio.
Expected Return means the average return, not the risk-adjusted return, if this was a risk-adjusted return, why would there have been something called the coefficient of variation which is a risk as a percentage of return. So it's only the average return and not the risk-adjusted. Standard deviationRead more
Expected Return means the average return, not the risk-adjusted return, if this was a risk-adjusted return, why would there have been something called the coefficient of variation which is a risk as a percentage of return. So it’s only the average return and not the risk-adjusted.
Standard deviation considers both downside and upside risk, to capture the only downside, there is something called downside deviation, which we also use in the Sortino ratio.
When we talk about risk in finance, we consider both upside and downside volatility generally that is even upside volatility is taken as a risk. But sometimes or may be less sophisticated people or people driven by sentiments just like in behavioural finance, we consider downside only as risk. PeoplRead more
When we talk about risk in finance, we consider both upside and downside volatility generally that is even upside volatility is taken as a risk. But sometimes or may be less sophisticated people or people driven by sentiments just like in behavioural finance, we consider downside only as risk. People who are loss aversed considers downside deviation as risk but yeah more often than not, when we say Risk, we mean both upside and downside deviation .
I mean if this is a multiple-choice, just use options and if you need to solve it and come up with an answer here it is: x+y = -1 so x= -1-y, y+z=1 so z= 1-y Given Z+X = 0 so we now substitute the values of x and z in this : 1-y-1-y = 0 which is y=0, so if y=0 then x= -1 and z=1
I mean if this is a multiple-choice, just use options and if you need to solve it and come up with an answer here it is:
x+y = -1 so x= -1-y, y+z=1 so z= 1-y
Given Z+X = 0 so we now substitute the values of x and z in this :
1-y-1-y = 0 which is y=0, so if y=0 then x= -1 and z=1
off-market forwards contracts are those which do not have a zero value, to begin with. Here is an example: Let's say the price of a share of Axis Bank is 1000 today and the risk-free rate is 6%, assuming no benefits and dividends, the one-year forward price ideally would be 1000(1.06) = 1060 If youRead more
off-market forwards contracts are those which do not have a zero value, to begin with.
Here is an example:
Let’s say the price of a share of Axis Bank is 1000 today and the risk-free rate is 6%, assuming no benefits and dividends, the one-year forward price ideally would be 1000(1.06) = 1060
If you want to enter into contract, the price in the market would have been 1060 but suppose you want to have a short position and some other party let’s say A wants to have a long position and he wants the price of the contract to be 1051 since he finds this lucky let’s say, and so he (A) will give you today the PV of the difference that is PV of 9, and you agree to come into this. So this type of contracts do not have a zero value to begin with.
To calculate the SD of this, use E(x^2) - [E(X)]^2, this will be the variance and just take the square root of it to get the S.D E[X] you already calculated, Now calculate E(x^2) = 115^2 *0.1 + 120^2 *0.1 and so on..
To calculate the SD of this, use E(x^2) – [E(X)]^2, this will be the variance and just take the square root of it to get the S.D
E[X] you already calculated, Now calculate E(x^2) = 115^2 *0.1 + 120^2 *0.1 and so on..
how to solve qtn 10
We know Variance = (Std deviation )^2 Now , (14.40)^2 = (0.3*20)^2 + (0.7*12)^2 + 2*0.3*0.7*Covariance, solve for Covariance which will be equal to 240 or 0.024. I hope you know the formula for the variance of the portfolio.
We know Variance = (Std deviation )^2
Now ,
(14.40)^2 = (0.3*20)^2 + (0.7*12)^2 + 2*0.3*0.7*Covariance, solve for Covariance which will be equal to 240 or 0.024.
I hope you know the formula for the variance of the portfolio.
See lessPortfolio
Expected Return means the average return, not the risk-adjusted return, if this was a risk-adjusted return, why would there have been something called the coefficient of variation which is a risk as a percentage of return. So it's only the average return and not the risk-adjusted. Standard deviationRead more
Expected Return means the average return, not the risk-adjusted return, if this was a risk-adjusted return, why would there have been something called the coefficient of variation which is a risk as a percentage of return. So it’s only the average return and not the risk-adjusted.
Standard deviation considers both downside and upside risk, to capture the only downside, there is something called downside deviation, which we also use in the Sortino ratio.
See lessPortfolio Management
If that's the case, then I won't comment further. Let some moderator or someone doing CA Final comment.
If that’s the case, then I won’t comment further. Let some moderator or someone doing CA Final comment.
See lessPortfolio
When we talk about risk in finance, we consider both upside and downside volatility generally that is even upside volatility is taken as a risk. But sometimes or may be less sophisticated people or people driven by sentiments just like in behavioural finance, we consider downside only as risk. PeoplRead more
When we talk about risk in finance, we consider both upside and downside volatility generally that is even upside volatility is taken as a risk. But sometimes or may be less sophisticated people or people driven by sentiments just like in behavioural finance, we consider downside only as risk. People who are loss aversed considers downside deviation as risk but yeah more often than not, when we say Risk, we mean both upside and downside deviation .
See lessPortfolio Management
Variance unit, in this case, should be %^2 and not %, since these are mentioned in percentage , so it's the standard deviation and not the variance.
Variance unit, in this case, should be %^2 and not %, since these are mentioned in percentage , so it’s the standard deviation and not the variance.
See lessHello sir I have a doubt on question 31 of BMLRS
I mean if this is a multiple-choice, just use options and if you need to solve it and come up with an answer here it is: x+y = -1 so x= -1-y, y+z=1 so z= 1-y Given Z+X = 0 so we now substitute the values of x and z in this : 1-y-1-y = 0 which is y=0, so if y=0 then x= -1 and z=1
I mean if this is a multiple-choice, just use options and if you need to solve it and come up with an answer here it is:
x+y = -1 so x= -1-y, y+z=1 so z= 1-y
Given Z+X = 0 so we now substitute the values of x and z in this :
1-y-1-y = 0 which is y=0, so if y=0 then x= -1 and z=1
See lessSwaps & Forwards
off-market forwards contracts are those which do not have a zero value, to begin with. Here is an example: Let's say the price of a share of Axis Bank is 1000 today and the risk-free rate is 6%, assuming no benefits and dividends, the one-year forward price ideally would be 1000(1.06) = 1060 If youRead more
off-market forwards contracts are those which do not have a zero value, to begin with.
Here is an example:
Let’s say the price of a share of Axis Bank is 1000 today and the risk-free rate is 6%, assuming no benefits and dividends, the one-year forward price ideally would be 1000(1.06) = 1060
If you want to enter into contract, the price in the market would have been 1060 but suppose you want to have a short position and some other party let’s say A wants to have a long position and he wants the price of the contract to be 1051 since he finds this lucky let’s say, and so he (A) will give you today the PV of the difference that is PV of 9, and you agree to come into this. So this type of contracts do not have a zero value to begin with.
See lessDERIVATIVES Q47/pg56 (Full English Batch)
Please repost this image, it's inverted.
Please repost this image, it’s inverted.
See lessDear Sir, I have facing a doubt in portfolio question, Sir In this question if we not calculated H.P.Y and calculate the question with figures then expected return toh shi aa rhai but standard deviation shi nhi aa rha. Sir please help me to clarify the doubt. Thank u sir.
To calculate the SD of this, use E(x^2) - [E(X)]^2, this will be the variance and just take the square root of it to get the S.D E[X] you already calculated, Now calculate E(x^2) = 115^2 *0.1 + 120^2 *0.1 and so on..
To calculate the SD of this, use E(x^2) – [E(X)]^2, this will be the variance and just take the square root of it to get the S.D
E[X] you already calculated, Now calculate E(x^2) = 115^2 *0.1 + 120^2 *0.1 and so on..
See lesscost of capital
Sir In class have clearly dictated "Betas have been found to have a tendency to regress towards 1"
Sir In class have clearly dictated “Betas have been found to have a tendency to regress towards 1”
See less