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  1. R

    Fun facts

    1) Agriculture commodity option (started again from 1984) 2) Equity premium puzzlee
  2. R

    FRM Fun 4

    IN your variation calculation the denominator (n-1) is not required
  3. R

    FRM Fun 4

    My understanding is that: V(X) = V(Y) = E(X^2) - (E(X))^2 for E(X) = sigma(p*a) = 1/6(1 + 2+ 3 + 4 + 5 + 6) = 1/6 * 21 = 3.5 E(X^2) = sigma(p*a^2) = 1/6(1 + 4 + 9 + 16 + 25 + 36) = 15.1667 So V(X) = 15.667 - 3.5 ^ 2 = 15.667 - 12.25 = 2.91667 So for the first case V(X+Y) = V(X) + V(Y) =...
  4. R

    FRM Fun 4

    Given E(X)=E(Y) = 3.5 V(X)=V(Y)= 35/12 correlation(X,Y)=0.5 cov(X,Y) = correlation(X,Y)*sqrt(V(X).V(Y)) = 1.458333 var(X+Y) = var(X)+var(Y)+2Cov(X,Y) = 8.75 E(X+Y) = E(X) + E(Y) no change
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