Testing the market for Weak Form Efficiency
Evidence that supports the weak form
Ball 1978: Trading rules that result from technical analysis is not profitable
No serial correlation between daily returns over short intervals
The risk-free asset and the capital allocation line
Main article: Capital allocation line
The risk-free asset is the (hypothetical) asset which pays a risk-free rate. In practice, short-term government securities (such as US
treasury bills) are used as a
Assumptions of CAPM
1. Investors are Price takers
- No investor is large enough relative to the market to influence () equilibrium prices
by their individual trades
- Everyone should pay/receive the same price for an asset everyone earns an equal
return f
Expectations theory (ET)
The Expectations theory asserts that forward rates = market expectations of future IRs
i.e.
If we restrict the forecast to IRs on bonds with 1 year to maturity (i.e. n=1) and drop the n, the
notation can be simplified to f(t) = E
Lecture 10
Option strategies
Introduction
At the end of this lecture, you should
understand:
option concepts and various terminologies
various option strategies and their payoffs
put-call parity, and based on the parity derive the
value of puts or cal
CVEN2002/CVEN2702
Engineering Computations - Statistics
Statistics Laboratory Class Week 1 : Introductory Matlab Tutorial
In your statistics course, there are scheduled computer tutorials in which you explore the use of
Matlab in statistics. Matlab is ava
FINS1613
Lecture 2:
Financial maths
Annuity: Level stream of cash flows for a fixed time.
Ordinary annuity: cash flows occur at end of each time period
Annuity due: cash flows occur at the beginning of each time period
Deferred annuity: the first cash flo