FORMULAS on midterm 2(given) - The following formulas below...

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The following formulas below may be of use. 2 2 2 X bX a b σ σ = + Y X Y X Y X σ ρσ σ σ σ 2 2 2 2 + + = + Y X Y X Y X σ ρσ σ σ σ 2 2 2 2 + = For “weighted average” where a+b = 1 Y X Y X bY aX b a b a σ σ ρ σ σ σ 2 2 2 2 2 2 + + = + If X 1 & X 2 are uncorrelated (so ρ = 0), then variance of a portfolio of n investments denoted X 1 , X 2 , X 3 , …X n ; each with a 1/n share, is: 2 2 2 2 2 2 2 ) / 1 ( 2 ) / 1 ( 2 ) / 1 ( ) / 1 ( ... ) / 1 ( ) / 1 ( ... 2 1 2 1 n n X X X X n X n X n n n n σ σ σ σ σ σ + + + = + + + For X with binomial distribution: μ = np ; σ = np(1-p) and the probability that X=k is:
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  • Winter '09
  • Brown
  • Probability theory, X1

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