Chapter 5 The Time Value of Money
... there may be some form of diversification, which is the reduction in risk from combining investments whose returns are not perfectly ...
... there may be some form of diversification, which is the reduction in risk from combining investments whose returns are not perfectly ...
Variance and Standard Deviation - Penn Math
... Expected value for a binomial random variable For X a binomial random variable with parameters n and p ...
... Expected value for a binomial random variable For X a binomial random variable with parameters n and p ...
Return, Risk, and the Security Market Line
... Excel also has a covariance function, =COVAR, but we do not use it because it divides by n instead of n-1. Verify that you get a Beta of about 0.72 if you use the COVAR function divided by the variance of the Market Returns (Use the Excel function, =VAR). ...
... Excel also has a covariance function, =COVAR, but we do not use it because it divides by n instead of n-1. Verify that you get a Beta of about 0.72 if you use the COVAR function divided by the variance of the Market Returns (Use the Excel function, =VAR). ...
Chapter 10
... Figure 10.5 The Empirical Distribution of Annual Returns for U.S. Large Stocks (S&P 500), Small Stocks, Corporate Bonds, and Treasury Bills, 1926–2011 ...
... Figure 10.5 The Empirical Distribution of Annual Returns for U.S. Large Stocks (S&P 500), Small Stocks, Corporate Bonds, and Treasury Bills, 1926–2011 ...
Chapter 6 Introduction to Return and Risk
... • Explained variance: β 2 σx2 • Unexplained variance: σ2 . What fraction of the total variance of ỹ is explained by x̃? ...
... • Explained variance: β 2 σx2 • Unexplained variance: σ2 . What fraction of the total variance of ỹ is explained by x̃? ...
File
... You have the choice between (1) a guaranteed dollar reward or (2) a coin-flip gamble of $100,000 (50% chance) or $0 (50% chance). The expected value of the gamble is $50,000. • Mary requires a guaranteed $25,000, or more, to call off the gamble. • Raleigh is just as happy to take $50,000 or take the ...
... You have the choice between (1) a guaranteed dollar reward or (2) a coin-flip gamble of $100,000 (50% chance) or $0 (50% chance). The expected value of the gamble is $50,000. • Mary requires a guaranteed $25,000, or more, to call off the gamble. • Raleigh is just as happy to take $50,000 or take the ...
Return
... • What is the difference between systematic and unsystematic risk? • What type of risk is relevant for determining the expected return? • Consider an asset with a beta of 1.2, a risk-free rate of 5% and a market return of 13%. • What is the reward-to-risk ratio in equilibrium? • What is the expected ...
... • What is the difference between systematic and unsystematic risk? • What type of risk is relevant for determining the expected return? • Consider an asset with a beta of 1.2, a risk-free rate of 5% and a market return of 13%. • What is the reward-to-risk ratio in equilibrium? • What is the expected ...
Risk Management Lessons from the Credit Crisis
... of risk factors, including volatilities and correlations, could be measured inaccurately. Third, the mapping process, which consists of replacing positions with exposures on the risk factors, could be incorrect. These fall in the broad category of model risk. As an example of the first problem, many ...
... of risk factors, including volatilities and correlations, could be measured inaccurately. Third, the mapping process, which consists of replacing positions with exposures on the risk factors, could be incorrect. These fall in the broad category of model risk. As an example of the first problem, many ...
Chapter 1 A Brief History of Risk and Return
... Excel also has a covariance function, =COVAR, but we do not use it because it divides by n instead of n-1. Verify that you get a Beta of about 0.72 if you use the COVAR function divided by the variance of the Market Returns (Use the Excel function, =VAR). ...
... Excel also has a covariance function, =COVAR, but we do not use it because it divides by n instead of n-1. Verify that you get a Beta of about 0.72 if you use the COVAR function divided by the variance of the Market Returns (Use the Excel function, =VAR). ...
Value at Risk
... • VaR is the loss level that will not be exceeded with a specified probability • C-VaR is the expected loss given that the loss is greater than the VaR level • Although C-VaR is theoretically more appealing, it is not widely used ...
... • VaR is the loss level that will not be exceeded with a specified probability • C-VaR is the expected loss given that the loss is greater than the VaR level • Although C-VaR is theoretically more appealing, it is not widely used ...
Value at Risk - Binus Repository
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
chap013
... standard deviation for an individual asset? For a portfolio? What is the difference between systematic and unsystematic risk? What type of risk is relevant for determining the expected return? Consider an asset with a beta of 1.2, a risk-free rate of 5%, and a market return of 13%. What is t ...
... standard deviation for an individual asset? For a portfolio? What is the difference between systematic and unsystematic risk? What type of risk is relevant for determining the expected return? Consider an asset with a beta of 1.2, a risk-free rate of 5%, and a market return of 13%. What is t ...
Portfolio Theory Lecture
... information X. Here, you can think of a regression where the conditioning variables in X are used to forecast Y, and the fitted values from the regression are the conditional expectation of Y given the values of X. The variance of Y is then split into the part explained by the X variables, and the r ...
... information X. Here, you can think of a regression where the conditioning variables in X are used to forecast Y, and the fitted values from the regression are the conditional expectation of Y given the values of X. The variance of Y is then split into the part explained by the X variables, and the r ...
Return, Risk, and the Security Market Line
... Diversification can substantially reduce the variability of returns without an equivalent reduction in expected returns This reduction in risk arises because worse than expected returns from one asset are offset by better than expected returns from another However, there is a minimum level of ri ...
... Diversification can substantially reduce the variability of returns without an equivalent reduction in expected returns This reduction in risk arises because worse than expected returns from one asset are offset by better than expected returns from another However, there is a minimum level of ri ...
Risk assessment of portfolios of exotic derivatives
... While the risk measures and statistical uncertainty quantifies the risk in a very nice way, it could be interesting to compare the model used with real market outcomes. This is done by using some kind of backtesting method. In this study we will use a pretty straightforward and simple backtest. The ...
... While the risk measures and statistical uncertainty quantifies the risk in a very nice way, it could be interesting to compare the model used with real market outcomes. This is done by using some kind of backtesting method. In this study we will use a pretty straightforward and simple backtest. The ...
1. Capital Market Theory: An overview
... Security prices are determined more by the future than the past. Beta is theoretically an estimated of future stock return volatility. The future, of course, is unobservable. Consequently, we must estimate beta using current and historical information. We typically, use the market model as follows: ...
... Security prices are determined more by the future than the past. Beta is theoretically an estimated of future stock return volatility. The future, of course, is unobservable. Consequently, we must estimate beta using current and historical information. We typically, use the market model as follows: ...
Chapter 13
... • What is the difference between systematic and unsystematic risk? • What type of risk is relevant for determining the expected return? • Consider an asset with a beta of 1.2, a risk-free rate of 5% and a market return of 13%. • What is the reward-to-risk ratio in equilibrium? • What is the expected ...
... • What is the difference between systematic and unsystematic risk? • What type of risk is relevant for determining the expected return? • Consider an asset with a beta of 1.2, a risk-free rate of 5% and a market return of 13%. • What is the reward-to-risk ratio in equilibrium? • What is the expected ...
Introduction to Financial Management
... • Announcements and news contain both expected and surprise components • The surprise component affects stock prices • Efficient markets result from investors trading on unexpected news – The easier it is to trade on surprises, the more efficient markets should be ...
... • Announcements and news contain both expected and surprise components • The surprise component affects stock prices • Efficient markets result from investors trading on unexpected news – The easier it is to trade on surprises, the more efficient markets should be ...
New index measures returns to risk in crop production
... Methods of reducing risk These high levels of risk estimates for individual crops imply a need for, and potential gain from, reducing risk. There are three general types of agricultural risk-reducing strategies. The first, forward contracting, is not always available to individual growers and, when ...
... Methods of reducing risk These high levels of risk estimates for individual crops imply a need for, and potential gain from, reducing risk. There are three general types of agricultural risk-reducing strategies. The first, forward contracting, is not always available to individual growers and, when ...
Value at Risk
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
L. Favre, A. Signer. "The difficulties of measuring the benefits of hedge funds" Journal of Alternative Investment (Summer 2002)
... AM = Arithmetic mean; sum total of the values weighted with relative frequencies f i = Frequency; frequency with which a specific value x occurs Negative skewness and positive excess kurtosis are unwelcome distribution features for the investor, but these are not taken into account in a mean varianc ...
... AM = Arithmetic mean; sum total of the values weighted with relative frequencies f i = Frequency; frequency with which a specific value x occurs Negative skewness and positive excess kurtosis are unwelcome distribution features for the investor, but these are not taken into account in a mean varianc ...
Value at Risk
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
Value at Risk - Binus Repository
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
... The first simulation trial assumes that the percentage changes in all market variables are as on the first day The second simulation trial assumes that the percentage changes in all market variables are as on the second day and so on ...
Chapter 7
... 1. Explain the relation between risk and return. 2. Describe the two components of a total holding period return, and calculate this return for an asset. 3. Explain what an expected return is, and calculate the expected return for an asset. 4. Explain what the standard deviation of returns is, expla ...
... 1. Explain the relation between risk and return. 2. Describe the two components of a total holding period return, and calculate this return for an asset. 3. Explain what an expected return is, and calculate the expected return for an asset. 4. Explain what the standard deviation of returns is, expla ...
Value at risk
VaR redirects here. For the statistical technique VAR, see Vector autoregression. For the statistic denoted Var or var, see Variance.In financial mathematics and financial risk management, value at risk (VaR) is a widely used risk measure of the risk of loss on a specific portfolio of financial exposures. For a given portfolio, time horizon, and probability p, the p VaR is defined as a threshold loss value, such that the probability that the loss on the portfolio over the given time horizon exceeds this value is p. This assumes mark-to-market pricing, and no trading in the portfolio.For example, if a portfolio of stocks has a one-day 5% VaR of $1 million, there is a 0.05 probability that the portfolio will fall in value by more than $1 million over a one day period if there is no trading. Informally, a loss of $1 million or more on this portfolio is expected on 1 day out of 20 days (because of 5% probability). A loss which exceeds the VaR threshold is termed a ""VaR break.""VaR has four main uses in finance: risk management, financial control, financial reporting and computing regulatory capital. VaR is sometimes used in non-financial applications as well.Important related ideas are economic capital, backtesting, stress testing, expected shortfall, and tail conditional expectation.