It is said that :
A typical distribution is a regime-switching volatility model: the regime (state) switches from low to high volatility, but is never in between. A distribution is “regime switching” if it changes from high to low volatility.
Further, following are the assumptions of...
Reference AIM: Calculate an arbitrage payoff and describe how arbitrage opportunities are ephemeral.
1. Cash and carry: Short forward +Borrow cash to Buy spot commodity
2. Reverse cash and carry: Long forward +Short spot commodity and Lend/invest cash proceeds
For the point number 1...
What i understand about Null Hypothesis ( H0 ) is as follows:
1. If the original claim includes equality (<=, =, or >=), it is the null hypothesis.
2. If the original claim does not include equality (<, not equal, >) then the null hypothesis is the complement of the original claim.
are you referring to Nominal and Real risk free rates ?
Expected return from an asset with zero beta risk is the risk free rate which is used for estimating the cost of equity in CAPM.
Reltaionship between Nominal and Real Risk free rate is:
Real risk free rates = Nominal risk free...