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Hi Ryan, Great Video as Always. I am actually trying to calculate the relative volatility between a Govt. T-Bond and a stock index returns. Can you suggest if I should directly Divide the S.D. of Index returns by the S.D. of Bond returns. OR, I should first Normalise the S.D.s by ( S.D/ Mean) to get it as a % of the Average. Then divide both the S.D. to get the Ratio.
Hey! To calculate the relative volatility between a government T-Bond and a stock index, you can directly divide the standard deviation (S.D.) of the index returns by the S.D. of the bond returns. This will give you a straightforward ratio of volatilities. However, normalizing the standard deviations by their means (thus converting them to coefficients of variation) before dividing can provide a more relative measure, considering the scale of returns, but it depends on the specific analysis context and what you intend to infer from the volatility comparison.
Hello! So, "normaliztion" with exp is used to take into account the fact that prices will change (unexpectedly) for the April contract in the future? If not, then what is the point of Exp here?...still dont quite grasp the concept. Also, in you experience, is it worth reading John C Hall derivatives in addition to studying CFA curriculum? Or is it a bit too much and overly technical for CFA 1 students? I know there is a playlist by Mark Meldrum but I'm still not sure if it's going to be helpful or whether i wont be put off by unnecessary details. I'm not planning to follow a career of a pure bred quant guy.
Hey! I know "e" and the Excel "exp()" function can get a bit confusing at first! I remember getting confused by it when I was first learning these topics. "e" is just used as a way to discount the future value of a cash flow to the present value at a continuously compounded rate of interest. I have a full 14 minute video on this topic if you are interested here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-ftXX4nZJ4pk.html Personally, while studying CFA exams I never went out of the curriculum much. The point being that there is so much to cover inside the curriculum that it is hard to find time for other things. I'd say focus on the curriculum for now rather than reading John Hull
Hi mate, I was not sure what you meant by the contract was worth $0 to both parties, by my calculations the contract never went below around $200k. In Dec 2023, you committed to buy 100 troy ounces of gold for $203,520.00 In Mar 2024, you sold your commitment of 100 troy ounces of gold for $213,520.00 Netting +$10k (before any future value of money calculations & costs).
You're talking about the gold value, but the contract itself also has a value. Before the expected gold price changes, neither the buyer nor the seller are at a gain or loss, so the contract itself has no value. At that point in time, gold is simply exchanged at the price it is worth, no gain or loss. I think.
