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Quant finance is about finding prices of illiquid assets in terms of more liquid assets. So if you have the the data for liquid small house prices you should be able to come up with a reasonable guess for less liquid larger houses, for example. That's basically what's been done all the time - replication of complicated derivatives wrt more liquid assets. ...


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There exist a lot of way to choose risk factors and the choice differs according to the kind of underlying assets. In your case, particularly, since the portfolio is composed by currencies, I would choose the risk factors mainly among all the macroeconomic variables available in your dataset or data provider. After that, to choose on which of them basing ...



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