
bank discount rate
dollar discount/face value * 360 / t

covariance of returns between A and B
P(1)*(rA1eA)(rB1eB)+P(2)*(rA2eA)(rB2eB)

permutation formula
N!/(NR)!

X widens confidence level while Y shrinks confidence level
 reliability factor
 sample size, degree of freedom

SD formula
 1.mean
 2. (sample  mean)^2
 3. sum of (2) / (n1)
 4. root (3)
 OR
 1.mean
 2.sum (prob*(sample  mean)^2)
 3.root (2)

sharpe ratio/safety first formula and rule
 (return  rf)/SD
 the higher the better

from peakest to least peak
L, M, P

support and resistance level
 support: buying is sufficient to stop decline
 resistance: selling is sufficient to stop rise

EAR formula
(1+holding period yield)^full year/holding period1

monte carlo simulation
 requires probability distribution
 what if analysis
 complement analytical methods

pvalue
the smaller level of significance at which a hypothesis can be rejected

joint probability of AB if they are independent event
P(A)*P(B)

conditional prob1: P(Z)
P(Z/A)*P(A) + P(Z/B)*P(B) + P(Z/C)*P(C)

conditional prob2: P(A/Z)
P(Z/A)*P(A)/P(Z)

standard error
SD/root(n)

positively skewed (right skewed/peak at left) implication
median < mean

price target
Neckline  (head  neckline)

Adjustable rate mortgage
 1. calculate payment assuming initial rate last for whole term
 2. calculate the PV at adjustment point
 3. calculate payment for the rest of term using new rate

return given YTM dropped
 1. calculate PV using dropped YTM for remaining term
 2. ((1)purchase price + dividend/coupon) / purchase price

past average compound annual rate
((1+r1)(1+r2)(1+r3))^(1/3)1

mean absolute deviation
sums of deviations / number of deviations

technical analysis: converging treadlines for triangle implies..
trend will continue

RSI (relative strength index) above 70 means
overbought

unbiasd estimator
expected value equal to true value of population parameter

consistent estimator is more accurate when
sample size is greater

chebyshev's inequality formula  the proportion of observations falling within 3 SD of the mean is
1(1/3^2)

P(A) or P(B)
P(A) + P(B)  P(A and B)

tdist with sufficiently high degree of freedom approximate XX, the higher the degree of freedom, the XX the tail
normal; thinner

annual money market yield
holding period yield * 360 /t

bond equivalent yield
2 * [(1+holding period yield)^half year/holding period1]

shortfall risk
prob that the portfolio value will fall below some minimum level in future

standard normal distribution has mean and variance =
zero and one

arithmetric return is appropriate for estimating
next period return

given significance level of 5%, a test will..
reject true hypothesis 5% of the time

most appropriate dist for asset price is
lognormal

low putcall ratio and low mutual fund cash position signals XX market while high volatility index signals XX market
bullish; bearish

technical analysis assumes
 supple and demand governed by rational and irrational behavior
 shifts in demand/supply can be observed from market price
 price of individual assets and market move in trends that persist

zscore for 90 and 95% confidence level
1.645, 1.96

1, 2, 3 deviation from mean correspond to confidence level of
68, 95, 99.7

confidence level range formula
mean plus/minus zscore * SD/root(n)

sample mean of large sample always have XX dist
normal

positive excess kurtosis mean
fatter tails

technical analysis chart mostly appropriate for intermarket analysis
relative strength chart

SD of a portfolio
root(w1$SD1$+w2$SD2$+2w1w2SD1SD2)

change from high point to low point is 80, whats the expected resistance level
 low + 80*1/2
 low + 80*5/8
 low + 80*2/3

