Explain volatility associated to the standard deviation
How is volatility associated to the standard deviation of the underlying’ return?
Expert
The real rate at which the underlying grows on average doesn’t influence the value. Certainly, the volatility, associated to the standard deviation of the underlying’s return, does issue. During practice, it’s generally much, much harder to estimate such average growth than the volatility; therefore we are rather spoiled in derivatives which we only require to estimate the relatively stable parameter, volatility2.
The purpose that this is true is that by hedging an option with the underlying we remove any exposure to the direction of the stock, whether this goes up or down ceases to matter. Through eliminating risk in this way we also remove any dependence upon the value of risk. End result is that we may as well see we are in a world wherein no one values risk at all, and all trade-able assets grow at the risk-free rate upon average.
Can a company have a default rate on its accounts receivable that is very low?
Illustrates an example of LIBOR Market Model?
What is Value at Risk?
A Program Element is a subdivision of a Major Program?
Describe the present economic crisis situation in Europe.
What are the difference between Capital Asset Pricing Model and Markowitz’s Modern Portfolio Theory?
Give an example of Model-independent hedging.
Illustrates an example of traditional Value at Risk by Artzner et al?
What is Crash Metrics?
Why do you think closed-end country funds frequently trade at a premium or discount?CECFs trade at premium or discount since capital markets of the home & host countries are segmented, preventing cross-border arbitrage. If cross-border arbit
18,76,764
1940703 Asked
3,689
Active Tutors
1445421
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!