Explain drawbacks of Brownian motion
Explain drawbacks of Brownian motion.
Expert
One of the unfortunate characteristics of Brownian motion is that this provides returns distributions with tails which are unrealistically shallow. During practice, asset returns have tails which are much fatter than those specified by the normal distribution of Brownian motion. There is even several evidence that the distribution of returns has infinite second moment. In spite of this, and the existence of financial theories which do incorporate such fat tails, Brownian motion is easily the most common model used to shown random walks in finance.
How is Crash Metrics deal?
What will be the effect on riskiness of a portfolio if assets with negative correlations (even very low correlations) are taken together?
How is GARCH determined?
Assume that the pound is pegged to gold at 6 pounds per ounce, while the franc is pegged to gold at 12 francs per ounce. Of course it implies that the equilibrium exchange rate ought be two francs per pound. If the current market exchange rate is 2.2 francs pe
Which numerical method should we use?
Explain the reasons why is quantitative finance in a mess?
How can financial managers estimate the average tax rate?
Normal 0 false false
Illustrates an example of Value at Risk Used?
Who measured risk as coherent, in finance theory?
18,76,764
1943702 Asked
3,689
Active Tutors
1419386
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!