Describe two different ways one can short equity market volatility
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Describe two different ways one can short equity market volatility
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- Portfolio return is a linear combination of individual securities whereas portfolio risk is nonlinear?The slope of the Security Market Line equals to ____, and the slope of Capital Allocation Line equals to____. Select one: A. Beta; Sharpe Ratio B. Market Risk Premium; Sharpe Ratio C. Risk free rate; Volatility D. Market Risk Premium; VolatilityWhat is equity risk premium?
- An efficient capital market is best defined as a market in which security prices reflect which one of the following? Multiple Choice A Current inflation B A risk premium C All available information D The historical arithmetic rate of return E The historical geometric rate of returnDescribe each of the following methods for estimating the cost of equity: (a) the CAPM, (b) DCF,and (c) the bond-yield-plus-risk-premium.Where can you obtain inputs for each of thesemethods, and how accurate are estimates basedon each procedure? Can you state categoricallythat one method is better than the others, or doesthe “best” method depend on the circumstances?There are three explanations for the shape of the yield curve i.e. Unbiased expectations theory, Liquidity theory, and Market segmentation theory. Please Discuss each one and compare them.
- The VIX measures Select one: a.Realized volatility B. Current volatility C. Historical volatility D. Implied volatilityThe return payable on equity is called Select one: a. Brokerage b. Interest c. None of the options d. Commission e. DiscountHow GARCH (generalized ARCH model) model is applied to Stock Price Volatility?
- Explain the following terms in the Capital Asset Pricing Model (CAPM): 1. Risk-Free Rate 2. Beta 3. Equity Risk Premium 4. Market Rate of Return 5. Market Risk PremiumDuration is important in understanding a fixed income portfolio because A. it is used in the capital asset pricing model B. it measures the interest rate sensitivity of a bonds value C. It measures the correlation with a bank's stock price D. It causes contagionQuestion No. 3: What is financial market equilibrium? And then explain its relation to required rate of return.
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