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  1. RiskRat

    Regime-Switching Volatility Model

    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...
  2. RiskRat

    Cash & Carry Model

    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...
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