BFF3121 - Formulae Sheet - Final Exam PDF

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List of Formulae Price Relative = Ending value / Beginning value

n



Return or HPY = Price Relative-1

Expected Return: i 1

Arithmetic Mean Return (AM): AM=  HPY / n

Variance:

Geometric Mean Return (GM) : GM= [ HPY] 1/n -1

pi( ri)

1 N

N

 ri

(  2 )   [ R i  E(R i )] 2 / n i 1

Covariance:





  

Covij  E R i  E R i   R j  E R j

i1

Value [Dollar]-weighted portfolio return:

 Vi     ri i1  Vp  N

R

Price-weighted portfolio return: N  P  R    i  ri i 1  Pp 

Pp Ci / 2  t i i (1 / 2) (1 / 2)2n   t 1

Portfolio Risk (n Assets):



n

2 port

E(Rp) = wE(RM) + (1 – w)RF Capital Market Line (CML):

n

Equal-weighted portfolio return:

R

Portfolio Expected Return:

  wi2 i2  i 1

n



E (R P)  RFR 

E( RM )  RFR

M

OR

E(R i )  RFR   i (R M - RFR)

i1 i j j 1

Covariance (Cov): COVij = riji j

Asset Beta:

Correlation coefficient: rij = COVij /ij

  Cov i,M  M2

Optimal Weight:

x

22   1, 2    22  2 1, 2 2 1

2n

Bond Valuation:

Pm  

GGM Model: V  D1 j k g

Sharpe Index: S  Ri  RFR i

i

n

Ct ( t)  t t 1 (1  i ) D n Ct   i) t (1 t 1  Duration:

Convexity:

d 2 P / di 2 1  n CFt 2   (t  t )  P (1  i )2  t 1 (1  i ) 

FCF Model:

Vj 

OFCF1 WACC j  g OFCF

ROE = Profit Margin x Asset Turnover x Leverage

P

Security market line (SML) / CAPM: R - RFR E(R i )  RFR  M 2 (Covi,M )

n

 wi wj covij

M

Treynor Index: T  Ri  RFR i i Information Ratio:

IR j 

Rj  Rb

 ER



ERj

 ER...