Fin415 Week 2 Slides

FIN415 Week 2 Risk Mathematics

A Random Walk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What are the Odds? ,[object Object],[object Object],[object Object],[object Object]

Pascal’s Triangle http://en.wikipedia.org/wiki/Pascal's_triangle

Interpreting Pascal’s Triangle ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Pascal’s Triangle Fractions and Percentages Six Flips of a Coin - Row 7 (2 6 ) Fraction Percentage 1/64 0.015625 6/64 0.093750 15/64 0.234375 20/64 0.312500 15/64 0.234375 6/64 0.093750 1/62 0.015625 Total 64/64 Total 1.000000

Dice ,[object Object],[object Object],[object Object],[object Object]

Playing Cards ,[object Object],[object Object],[object Object],[object Object]

Playing Cards - Dependent ,[object Object],[object Object],[object Object]

and/or ,[object Object],[object Object],[object Object]

Information and Probabilities ,[object Object],[object Object],[object Object]

Risk Neutral ,[object Object],[object Object]

Time ,[object Object],[object Object],[object Object],[object Object]

Discrete Time vs. Continuous Time ,[object Object],[object Object],[object Object]

Present Value (PV) - Discrete ,[object Object],[object Object]

Present Value (PV) - Continuous ,[object Object],[object Object]

What Do Buyers and Sellers Believe ,[object Object],[object Object]

Mean ,[object Object],[object Object],[object Object]

Median ,[object Object],[object Object]

Mode ,[object Object],[object Object]

Standard Deviation ,[object Object],[object Object],[object Object]

Calculating SD ,[object Object],[object Object],[object Object],[object Object],[object Object]

Calculating SD continued ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Standard Deviation = Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Standard Deviation = Risk ,[object Object],[object Object]

Standard Deviation = Risk ,[object Object],[object Object],[object Object]

Sampling ,[object Object],[object Object],[object Object],[object Object],[object Object]

CAPM ,[object Object],[object Object],[object Object]

β =Relative Risk ,[object Object],[object Object]

CAPM and NPV ,[object Object],[object Object],[object Object]

The “implied assumption” ,[object Object],[object Object]

Fin415 Week 2 Slides

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