By Professor Dr. Jürgen Franke, Professor Dr. Wolfgang K. Härdle, Professor Dr. Christian M. Hafner (auth.)
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Additional info for Statistics of Financial Markets: An Introduction
In general, it holds for independent random variables X1 , . . , Xn Cov(Xi , Xj ) = 0 for i = j . This implies a useful computation rule: n n Xj = Var j=1 Var(Xj ) . j=1 If X1 , . . ). 4) P(x ≤ X ≤ x + Δx ) 44 3 Basic Concepts of Probability Theory provided the denominator is diﬀerent from zero. The conditional probability of events of the kind a ≤ Y ≤ b reﬂects our opinion of which values are more plausible than others, given that another random variable X has taken a certain value. If Y is independent of X, the probabilities of Y are not inﬂuenced by prior knowledge about X.
The fact that options are not traded at all delivery prices suggests that they should be produced by the delta hedge process described in Chapter 6. a. a. 9: The eﬀect of a portfolio insurance in case ii) on portfolio value and return. ever, since a dynamic strategy is involved, transaction costs need to be taken into account and give rise to other problems. e. puts and calls on the DAX for example. This is not only beneﬁcial from a cost saving point of view but also because index options replace options on a single underlying transaction which are not traded on the market.
A. a. 9: The eﬀect of a portfolio insurance in case ii) on portfolio value and return. ever, since a dynamic strategy is involved, transaction costs need to be taken into account and give rise to other problems. e. puts and calls on the DAX for example. This is not only beneﬁcial from a cost saving point of view but also because index options replace options on a single underlying transaction which are not traded on the market. To compute the exact eﬀect of an index option hedge, the correlation of the portfolio with the index is needed.
Statistics of Financial Markets: An Introduction by Professor Dr. Jürgen Franke, Professor Dr. Wolfgang K. Härdle, Professor Dr. Christian M. Hafner (auth.)