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The asset rate of returns is the profit on a particular investment; it includes any change in the asset value, interest, commission or dividends and so, all other cash-flows which an investors receive or pays due to the investment.

4
votes
Spreads between asset prices $A_1$ and $A_2$ are indeed the key here. Since spreads can go negative, one certainly cannot model them with a geometric brownian motion. The natural quant inclination i …
answered Feb 10 '12 by Brian B
10
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The initial investment is the capital in the account used to support the portfolio, not the cost of the assets in the portfolio. For example, when you sell a stock or bond short, your account doesn't …
answered Mar 15 '14 by Brian B
4
votes
These returns are almost always modeled by finding some fundamental two-sided variable and modeling that. … For options, we would model their prices as derivatives -- we would take the log-returns of underlying prices as the fundamental variable, possibly with other models for what would happen to volatilities …
answered Nov 8 '11 by Brian B