# Questions tagged [return]

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### How to calculate expected return on a loan while having probability of default

I have data on loans including: initial loan taken by each borrower, their probability of default. Is there a way to calculate VaR that would show potential loss of that asset? First what I need is ...
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### Comparison between Absolute return and Relative return

In typical VaR calculation, we need to calculate the time series of historical realised return. There are mainly 2 ways to calculate such returns viz. ...
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1 vote
188 views

### Single outsized daily return value creates substantive discrepancy between annualized variance calculated from daily vs monthly returns

I am new here, and to the field. I hope my clunkiness in expressing myself can be forgiven. My situation is as follows: I have around three years of daily return data for some financial asset. Out of ...
1 vote
114 views

### How do asset prices behave in a single-period and multi-period model?

When we talk about the single-period CAPM, the return in a particular period t can be defined as $(P_t - P_{t-1})/P_{t-1}$. Investors plan at t-1 and get a payoff at t. After this period, the same ...
47 views

### Calculate combined return on corp. bond traded multiple times? [closed]

I hope this is an okay place to ask this: Case: Assume you find a corporate bond you want to invest in. You then invest in it below par several times over the years, and you also sell bits of your ...
56 views

### Am I able to find individual returns from total weighted average of returns? [closed]

As titled states… I am trying to figure out how to solve for individual return given average weighted total return and weights of individual returns? For example: 2% = (r1 x 0.2) + (r2 x 0.5) + (r3 x ...
1 vote
37 views

### Inflation in wealth forecast [closed]

I am building a model to simulate people's wealth in the next years. Say Mr X has a portfolio with an expected return of 3% (annual). From this I can simulate the return of his portfolio in the next ...
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### How to calculate daily returns when the cumulative PnL can become negative?

I would like to know a way to compute returns when the total PnL of a strategy can become negative. For example: Total PnL day 1: 100 Total PnL on day 2: -20 Total PnL on day 3: 30 I have that kind of ...
1 vote
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### How to calculate IRR between 2 numbers

I want to consider 4 scenarios in google sheets. All deal with a periodic return over n periods Positive to Positive Positive to Negative Negative to Negative ...
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1 vote
1k views

### Cumulative return calculation with monthly return [closed]

I am working on calculate the cumulative return and I have monthly return rate as input. So I found formula of cumulative return: $$\text{cumulative} = (1 + r_1) (1 + r_2)(1 + r_3) - 1$$ so I used <...
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1k views

### Long Short excess returns?

When calculating the long-short excess returns for a portfolio. Do I have to first calculate the excess returns of the long and short leg and then add them together or first calculate the average long ...
437 views

### CDS volatility: daily return calculated by simple substraction (Pt - Pt-1)?

I am working on validating the CDS volatility generated by a third party risk engine. It appears that returns are calculated with simple substractions and adjusted for the CS01: (Price of the CDS ...
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1 vote
62 views

### normalized 15-min absolute returns

I was reading an article today and I came across a new expression: "normalized 15-min absolute returns". I know what returns mean but I don't have any idea how I can normalize them ( I am not sure if ...
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### Return on asset value for one company different on Yahoo Finance and on Market watch

I am wondering why the return on asset (ROA) is so much different for a company when reported on Yahoo finance and Market watch website. Here is Yahoo finance link: Yahoo Finance and here is ...
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189 views

### What is the distribution of percentage return in general?

In finance, we often assume that the log-returns $\ln(1+R(t))$ follow a normal distribution. Since $\ln(1+R(t)) \approx R(t)$ when $R(t)$ is small, \begin{equation*} dS/S \sim \text{Normal}. \end{...
2k views

### Orthogonal sources of risk and return

I am sorry for my incompetence. I am new in Quantitive Finance, so I read an article about the relationship between Alpha and Portfolio Risk and I can not understand what is the meaning behind the ...
208 views

### Risk, required return and expected volatility - what is the relationship?

Return required from risk averse agents from risky investments are proportional to expected return variance. That is from the textbook, you take the portfolio with the highest return to standard ...
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1 vote
807 views

### Interpretation of Excess Return

How is excess return defined for a given asset? There are altogether two different definitions for excess return used in the calculation of alpha and beta and I'm unable to understand which one ...
1 vote
2k views

### How to calculate monthly Return from a Momentum Strategy with overlapping Holdingperiods?

I replicate a Momentum Strategy from Rey and Schmid (2007) "Feasible momentum strategies" based on the idea from Jegadeesh and Titman (1993). I only buy the single stock with the highest past return ...
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1k views

### Correlation: Use Price or Return? Return doesn't make sense [closed]

I am trying to find the correlation between the returns of two indices over a long period of time (10 years+) . Should I be using the index daily price level or the index daily total return? Most ...
1 vote
39 views

### What is the expected rate of return from paying 1 today for a 50/50 bet receiving either 2 in year 1 or 0.5 in year 2? [closed]

What do you think is the correct way to calculate expected return for this example? I think Method4 below is correct. Method1 35.4% = AVERAGE(1.0, 0.5^(1/2)-1) Incorrect, but some will argue that ...
1 vote
107 views

### How can I compare two mutual funds' performance with a sparse set of data?

I want to compare the performance of two mutual funds. The only data I have is annual returns for the past 7 years. So I have 7 observations for Fund 1 and 7 observations for Fund 2. In addition, I ...
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