Every covariance matrix must be positive semi-definite. If it were not then:
A typical leptokurtotic distribution can be described as a distribution that is relative to a normal distribution
Which of the provided answers solves this system of equations?
2y – 3x = 3y +x
y2 + x2 = 68
Suppose a discrete random variable can take on the values -1, 0 and 1 each with a probability of 1/3. Then the mean and variance of the variable is
An underlying asset price is at 100, its annual volatility is 25% and the risk free interest rate is 5%. A European call option has a strike of 85 and a maturity of 40 days. Its Black-Scholes price is 15.52. The options sensitivities are: delta = 0.98; gamma = 0.006 and vega = 1.55. What is the delta-gamma-vega approximation to the new option price when the underlying asset price changes to 105 and the volatility changes to 28%?
Consider the linear regression model for the returns of stock A and the returns of stock B. Stock A is 50% more volatile than stock B. Which of the following statements is TRUE?
Consider an investment fund with the following annual return rates over 8 years: +6%, -6%, +12%, -12%, +3%, -3%, +9%, -9% .
What can you say about the annual geometric and arithmetic mean returns of this investment fund?
In a quadratic Taylor approximation, a function is approximated by:
Consider two securities X and Y with the following 5 annual returns:
X: +10%, +3%, -2%, +3%, +5%
Y: +7%, -2%, +3%, -5%, +10%
In this case the sample covariance between the two time series can be calculated as:
Let X be a random variable normally distributed with zero mean and let . Then the correlation between X and Y is:
