JeanGuillaume
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What is factor timing?
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2 votes

In my opinion, factor timing is a field of active management where, indeed, you try to anticipate the performances of factors. For instance, growth stocks will outperform during economic expansion ...

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Binomial model arbitrage
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3 votes

In theory, we do not suppose there are transaction costs (or costs for short selling or even buying a security). In practice, effectively, you will have to pay the people that lend you the security ...

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Expected Return on Stock
1 votes

To compute the correlation between the stock return (let us say $R_X$) and the market return $R_M$, you just write: $\rho_{R_X,R_M} = \frac{Cov(R_X,R_M) }{\sigma_{R_X}\sigma_{R_M}} = \frac{Cov(R_X, \...

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Calculate the historical simulation VaR of the portfolio using Python
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0 votes

Let us start from the definition of the $VAR_{\alpha}$ at level $\alpha$. We denote by $R_P$ the random variable representing the absolute return of the portfolio (difference in value of $P$ between ...

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Dupont analysis of banks
3 votes

You can look at the contents of the CFA institute : https://blogs.cfainstitute.org/insideinvesting/2013/01/23/how-much-does-apple-make-a-dupont-analysis/ . As there are more and more candidates and ...

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Deriving Theoretical Result - ERC portfolio
3 votes

Ok, I found a solution ! So, we are starting from $(x_i\sigma_i - x_j\sigma_j)((x_i\sigma_i + x_j\sigma_j)(1 - \rho) + \rho\sum_k x_k \sigma_k) = 0 $ and we will show that the elements in the ...

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Interest rates impact on forward prices
1 votes

To answer this question, you need to know how forward prices are derived : non arbitrage argument. Thanks to it, we will show that we necessarily have $ F_T = S_0e^{rT} $ where $F_T$ is the price of ...

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Why is Delta Hedging a Hedge Against Short Position?
0 votes

That means that to determine the price of a security by non arbitrage you can either find the strategy that will hedge your short position ( when you sold an option) or you can find the strategy that ...

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When interest rates go up, why do call option prices go up?
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5 votes

When interest rates go up, there are two effects that explain the positive link with the increase in the price of a call option (according to Hull). There is the quote: " As interest rates in the ...

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Fixed Income Portfolio Optimization
1 votes

Do you have correctly formulated the problem for the solver ? If you want to maximise a function (the sharpe ratio) $f$, it is equivalent to minimise $-f$. This kind of confusion (minimising instead ...

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Relationship between BBB credit spreads and rising interest rates
1 votes

When interest rates rise, it is often because a rise of the inflation (for instance with the ECB and the FED). So it means that the nominal debt value of a company decreases and/or that the company ...

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What does leverage have to do with beta?
2 votes

Your leverage will be the amount of money you borrow to buy the risky portfolio P. Intuitively, the more you borrow money to buy P, the more you are exposed to market behaviour and so β will be high. ...

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