An Introduction to Mathematical Finance with Applications by Arlie O. Petters & Xiaoying Dong

Author:Arlie O. Petters & Xiaoying Dong
Language: eng
Format: epub
Publisher: Springer New York, New York, NY

Here η n is the Sharpe ratio of the security given as the ratio of the spread between the expected total return rate and the risk-free rate7 across the time step [t 0, t 1], to the security risk across the same time step. The relationship ( 5.53) is a discrete-time example of Girsanov theorem (see Neftci [13, Chap. 14] and references therein).

We now give a heuristic proof of ( 5.53). Our approach is to compute the Sharpe ratio η n first. By ( 5.14) on page 219, the expectation in the numerator of ( 5.54) is

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.