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Hi @David Harper CFA FRM, While going through the chapter I have a couple of questions: 1. Quanto Option - In the reading it mentions - If the correlation is positive, an increasing Nikkei will mean an increasing yen. That is favorable for the call seller. She has to settle the payoff, but...

Hi, it is mentioned in the Credit Exposure chapter that Exposure is proportional to T^(1/2). How do we know this result?

Hi, I am unable to understand this section of the chapter: Constantinides proved that the optimal strategy is to trade whenever risky asset positions hit upper or lower bounds. Within these bounds is an interval of no trading. The no-trading band straddles the optimal asset allocation from a...

Time lag 2 autocorrelation is highest, so autocorrelation with respect to two months prior produces the highest autocorrelation. Altogether we observe the expected decay in autocorrelation with respect to time lags of earlier periods. This result shows that current prices will be less...

Please explain me this derivation.

Hi David, I have been having issues understanding the normal/inverted and contango/normal backwardation theories related to the futures pricing. Please let me know if my understanding is correct: Today's date - T1 I am an oil producer and want to sell my oil in the market 6 months forward. In...

83.2 If the functional form is given by Y = B1 + B2*X, the population regression function (PRF) …. a. Has one set of values for each SRF; e.g., if five SRFs exist, then five PRFs exist b. Passes, in several points, through the conditional means of (Y) values c. Passes, in several points, through...

Google’s sample variance over 30 days is 0.0263%. We can test the hypothesis that the population variance (Google’s “true” variance) is 0.02%. The chi-square variable = 38.14: Sample variance (30 days) 0.0263% Degrees of freedom (d.f.) 29 Population variance? 0.0200% Chi-square variable...