Monte Carlo methods is more advantageous with more uncertainties of data in the financial market. It can also be used for generating draws from a probability distribution.
Q: Which of the following is a justification framework for the mean-variance approach? a)if trading is…
A: The question is based on the mean-variance approach of portfolio selection. The approach measures…
Q: In an efficient market when asset expected returns are plotted against asset betas, then all assets…
A: EFFICIENT MARKET IS THE MARKET WHICH CORRECTLY PRICE THE ASSET
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A: Standard deviation is the measure of risk of security and shows dispersion from mean.
Q: standard deviation of historical returns Market beta Tracking error risk Discuss in what scenario…
A: In financial terms, risk can be defined as the possibility that the real profits from an outcome or…
Q: Why do most assets of the same type show positive covariances of returns with each other?
A: Covariance is a way of measuring the directional relationship between the returns on two assets and…
Q: Explain risk arbitrage
A: It is a venture system to benefit from the narrowing of a hole of the exchanging cost of an…
Q: As a risk measure, Expected shortfall is more accurate and reliable in comparison to Value-at-Risk.…
A: This is to compare and find out which one is more better among expected shortfall and Value-at-Risk.…
Q: which of the following quantifies how closely a manager's return pattern follows that of a benchmark…
A: Managers' performance is evaluated on the basis of pattern that follows with benchmark index.
Q: What happens to the SML graph when risk aversion increasesor decreases?
A: Risk Aversion: The ability of a human being to avoid the risk and eventually reducing losses that…
Q: Which are the more complex applications of rate-of-return techniques/
A: The question is based on the concept of rate of return and its application in finance
Q: Does the use of universes of managers with similar investment styles to evaluate relative investment…
A: The use of universes of managers with similar investment styles to evaluate relative investment…
Q: When comparing NPV and IRR, which is incorrect? * . With NPV, the discount rate can be adjusted to…
A: Net present value is the difference between the present value of cash inflows and cash outflows.…
Q: When working with the CAPM, which of the following factors can be determined with the most…
A: Capital asset pricing model uses the beta factor to estimate the risk of a given security.
Q: Create a sample problem of an External Rate of Return.
A: External rate of return(ERR) It is the the rate of return on a venture where any "excess” cash is…
Q: Why the advantage of Portfolio analysis is it stimulates the use of externally oriented data to…
A: Portfolio analysis is defined as the study of an investment portfolio, which will also be a process…
Q: Some financial theorists consider the variance of the distribution of expected rates of return to be…
A: The variance of expected rates of returns describes a measure of the dispersion of real/actual…
Q: I can use the regression beta as my estimate of beta in a valuation. True or false
A: Beta refers to the measurement of the volatility of stock related to the market as a whole. When…
Q: quantitative risk analysis:
A: Quantitative risk analysis assess the risk associated with a particular monetary item.
Q: What is meant by volatility clustering? Briefly describe two models that areused to describe data…
A: When the large changes in financial asset prices are bundled together that further leads to results…
Q: What security provides a good estimate of the real risk-free rate?
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Q: Explain why the APV model is suited for situations in which the capitalstructure is changing during…
A: APV is a DCF method which is similar to NPV method but the only difference that APV has is that it…
Q: Illustrate the calculation of the standard deviation of returns?
A: Standard deviation refers to a measure of variation or dispersion of a set of values. We can…
Q: Describe the relation between Risk and Returns that was introduced by Harry Markowitz
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Q: What information would be required to compute the risk-asset ratio under Basle I?
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Q: Compare judgmental, time series, and causal forecasting models.
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Q: predict
A: Financial planning is always a challenging task for nay company & the things become even more…
Q: Explain Key Statistical Relationships between Covariance and Correlation of Returns?
A: Covariance:It is defined as the statistical relationship between stock prices of stock that vary…
Q: in a Statistical sense, the Single Index Model is best characterized by: the Capital Market Line The…
A: The single index model is the security pricing model which shows the relationship between security's…
Q: investors
A: Introduction: Indifference curve is a concept in economics which shows combination of a couple of…
Q: Is statistical arbitrage true arbitrage? Explain.
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Q: Diversification is most effective when security returns are positively correlated high negatively…
A: Introduction: Diversification is nothing but the strategy that reduces the risk by allocating assets…
Q: What is the general goal of trend analysis?
A: Trend analysis: Trend analysis is prepared to make comparison between the previous year's…
Q: How do managers, bankers, and security analysts use trend analysis, bench-marking, percent change…
A: Usually a managers, bankers, and security analysts use financial tools and techniques to measure and…
Q: A professional investor that you know makes the following observation about the assets on his…
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Q: According to modern portfolio theory, pair-wise covariance is more important to total portfolio risk…
A: According to modern portfolio theory, every investment's risk and return characteristics should not…
Q: An example of asymmetr information in financial markets is that
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Q: Explain arithmetic mean returns?
A: Arithmetic mean:It is a commonly used measure of mean (or measure of average). Arithmetic mean is…
Q: Critically discuss the application of EWMA, GARCH and asymmetric GARCH models to volatility…
A: Volatility should be forecastable using a volatility model. Almost all financial applications of…
Q: As a risk measure, Expected shortfall is more accurate and reliable in comparison to Value-at-Risk.…
A: Introduction : The expected shortfall (ES) can be understood as the risk measure—a notion employed…
Q: Calculate Paulson's WACC using market-value weights.
A: WACC is the weighted average of the cost of capital employed in a company. A company capital is…
Monte Carlo methods is more advantageous with more uncertainties of data in the financial market. It can also be used for generating draws from a probability distribution.
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- Critically discuss the application of EWMA, GARCH and asymmetric GARCH models to volatility estimation in financial engineering.What is meant by volatility clustering? Briefly describe two models that areused to describe data processes with volatility clustering?Some financial theorists consider the variance of the distribution of expected rates of return to be a good measure of uncertainty. Discuss the reasoning behind this measure of risk and its purpose.
- The following methods are used to measure market risk in the industry, except A Regression method B Historical simulation method C Delta-normal method D Monte Carlo methodThe higher a security's risk, the higher the return investors demand, and thus the less they are willing to pay for the investment. What do you understand from the statement mentioned above? Explain with necessary numerical data, and illustrate by means of a chart.What are some pros and cons of computing an expected return using a user-specified model versus estimating it from historical data?
- Why the advantage of Portfolio analysis is it stimulates the use of externally oriented data to supplement management’s judgment?Which of the following is a justification framework for the mean-variance approach? a)if trading is continuous and asset prices follow a multi-dimensional geometric Brownian motion with drift.b)If the investors’ state-specific utility is an exponential function of the assets variance. c)If investors’ preferences for risk are inter-dependent and serially correlated with asset returns.d)If the returns of all assets follow the Mandelbrot distribution.Risk means, in today's language, the probability of something bad happening or an unfortunate outcome. Risk in finance, however, is defined as the variance of the probability distribution of returns. a.) Why do these definitions seem contradictory? b.) Reconcile the two ideas.
- Briefly describe what is the low tail risk in econometrics.Hello This chapter is about security returns, and i dont understand what "Gamma, y" is in both of these equation. They are supposed to be First and Second-pass regression equation. What is Gamma used for and how does this have a relation with the CAPM formulaOne important assumption behind portfolio theory is that investors are “mean-variance maximizers.” What is the meaning of this? Explain why this assumption is important in the delineation of the efficient frontier.
