Quant 1 Question 16
- Thread starter fashepard
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Frank,
It may help to start with the end. When asked for variance (or standard deviation), we will generally be solving with either:
variance = E(X^2) - E(X)^2, or
variance = Summation of (x - average x)^2*Probability(x)
(For an example-in-action of the latter, you can look at the very last step in the CreditMetrics example from a post yesterday)
In this question, it becomes, how to get E(X^2) and (EX)?
I just added an the "alternative" solution, to the right of the original, on the XLS:
https://www.editgrid.com/bt/frm_2008/quant1_16
See if this helps...David
It may help to start with the end. When asked for variance (or standard deviation), we will generally be solving with either:
variance = E(X^2) - E(X)^2, or
variance = Summation of (x - average x)^2*Probability(x)
(For an example-in-action of the latter, you can look at the very last step in the CreditMetrics example from a post yesterday)
In this question, it becomes, how to get E(X^2) and (EX)?
I just added an the "alternative" solution, to the right of the original, on the XLS:
https://www.editgrid.com/bt/frm_2008/quant1_16
See if this helps...David
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