Returns, Volatility, and Simulation
Free GARP FRM Part I lesson in Quantitative Analysis. 18 min read, ~2,635 words.
Continuously compounded returns are time-additive (sum across periods); simple returns are not. Convert with R-cc = ln(1 + R-simple). Volatility, variance rate, and implied volatility are three different objects. Implied volatility is forward-looking and extracted from option prices; the others are realized. Jarque-Bera tests joint zero skew and excess kurtosis...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
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