# Questions tagged [expected-return]

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### Expected daily range (SPX) and daily realized range

I'm new in quant math, I'm self-studying it. I have two question in exp. daily range topic. How can we make the possibly most accurate estimation for expected daily ranges? My idea was to take data ...
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### Excess Return Covariance Matrix is Singular - Cash return and risk free rate are the same [closed]

I've created a three asset excess return covariance matrix. The assets are; equity, bonds, and cash. However, my cash return is the same as my risk free rate ( i.e. 3 month Euribor). This is leaving ...
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### Possibility of obtaining a positive mathematical expectation in a quoted currency

There is a currency pair C/USD = 1. C - currency in which I want to invest in order to make a profit in USD. Suppose its price changes discretely: 50% - increases by 20%, 50% - decreases by 20%. This ...
96 views

### How is option pricing related to the correlation between implied volatlity and the underlying?

The correlation between the index returns (e.g SPX) and its changes in option-impled volatility (e.g. VIX), is strong, stable and negative (the implied volatility feedback effect). To me at least, it ...
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### Find expected rate of return without drift based on ito process

I would like to know how to solve question (ii), I know it is a cash-or-nothing option but I have no idea how to get the expected rate of return even I use put-call parity. Could anybody guide me I ...
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1 vote
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### Return forecasting for portfolio optimization

I have some questions related to forecasting returns and how it's used to generate the inputs for portfolio optimization. First, I want to understand why factor models such as FF- 3-factor model are ...
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### Power-utility function for calculating Certainty equivalent

I have a question regarding how i should calculate 3.2-3.4, currently studying for an exam. What i don't get is how to acctually derive the certainty equivalent from the expected utility of gross ...
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### Determine expected geometric return from Sharpe ratio

I'm trying to calculate the expected annual geometric return, given that I'm provided with an annual Sharpe ratio (0.5), the yield on a 3-month T-Bill (5%) (using this yield as a proxy for the risk-...
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### If investors are risk-neutral, should the (equity) risk premium be zero?

I looked up ChatGPT and they stated that the (equity) risk premium should be zero for a risk-neutral world. The definition of a risk-neutral investor is that one is indifferent between additional or ...
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446 views

### Why are long 2 year Treasury futures (ZT) trading at negative carry?

The 2 year Treasury note yields ~4.9% in the cash market as of 29 Aug 2023. Assume implied cost of financing of 5.5% pa (3 month T-bill rate) to finance a long futures position. This results in a ...
1 vote
101 views

### Fama French Factor adjusted returns

I want to understand the extent to which portfolio performance can be explained by the three Fama French Factor model. I use the following approach: Regress the portfolio's excess returns against the ...
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### How to perform cross-sectional asset pricing regression?

I'm wondering is that possible to get insignificant beta estimates in the time-series context, but highly significant risk premium associated with that beta in the cross-sectional regression? Any ...
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