Consider a stock portfolio consisting of two units of S¹ and one unit of S². Calculate the probability of delta losses over one day, if the daily log-returns (X₁, X₂) of the stocks are independent with X₁ N(0.5, 1.1), X₂ ~ N(-0.2, 0.5) and the current stocks value are S= 100, S2 = 50.
Consider a stock portfolio consisting of two units of S¹ and one unit of S². Calculate the probability of delta losses over one day, if the daily log-returns (X₁, X₂) of the stocks are independent with X₁ N(0.5, 1.1), X₂ ~ N(-0.2, 0.5) and the current stocks value are S= 100, S2 = 50.
Chapter6: Risk And Return
Section: Chapter Questions
Problem 14P
Related questions
Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:Consider a stock portfolio consisting of two units of S' and one unit of S2. Calculate the
probability of delta losses over one day, if the daily log-returns (X1, X2) of the stocks
are independent with X1
are S = 100, S = 50.
N(0.5, 1.1), X2
N(-0.2,0.5) and the current stocks value
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you