alt="images"/>weight of
th asset in a portfolio,
return of an asset over a period
:
. Can be divided by
to give rate of return
asset
's return, with mean
and standard deviation
,
Cmean vector, standard deviation vector, and covariance matrix of asset returns
return of a risk‐free asset
market portfolio, return of the market portfolio
beta of an asset
,
empirical estimate of
arithmetic average of
samples of
,
forward date, future date
forward value of asset
at time
for forward date
‐value of a forward agreement on asset
for forward date
and price
simple (noncompounding) forward rate that can be locked at
for forward deposit period
. The first term may be omitted when
.
continuously compounding forward rate that can be locked at
for forward deposit period
. The first term may be omitted when
.FXforeign currency exchange rate
domestic and foreign interest rates for forward exchange rate calculations
the
‐forward exchange rate that can be locked at
today's value of an asset
today's value of a contingent claim
generic random sample path
value of a money‐market account at time
along sample path
normal or Gaussian random variable with mean
and variance
lognormal random variable whose log is
CDFcumulative ditribution functionpdfprobability density functionpmfprobability mass function
cumulative distribution function of a standard (
) normal random variable,
probability density function of a standard normal random variable,
BMBrownian motion
Brownian motion at time
along sample path
proportional, lognormal volatilityATM, ATMFat‐the‐money spot, at‐the‐money forward
Dirac's delta function,
absolute, normalized volatilityCMSconstant maturity swap rateAD,
Arrow‐Debreu price, today's price of unit payoff at state
on future date
i.i.d.independent and identically distributed
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