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Purpose Formula
Purpose Formula
Earnings Model
RE 1 ⎛ ROE ------------ – 1⎞
EPS ⎝ k CS ⎠
V CS = ------------1- + ------------------------------------
-
k CS k CS – g
Purpose Formula
Variance
2 N
∑ ρt ( Xt – X )
2
σX =
t=1
Standard Deviation 2
σX = σX
Covariance
N
σ X, Y =
t=1
∑ [ ρt ( Xt – X ) ( Yt – Y ) ]
Correlation Coefficient σ X, Y
r X, Y = ------------
-
σX σY
Purpose Formula
Portfolio Formulae
Expected Return of a Portfolio
N
E ( RP ) = ∑ wi Ri
i=1
Portfolio Beta
N
βP = ∑ wi βi
i=1
Purpose Formula
Jensen’s Alpha αi = ( Ri – Rf ) – βi ( RM – Rf )
Purpose Formula
C = ---------------------------------------------------------------------
Bond Price
The n-period forward rate given two spot rates i
(note that i > j, and n = i - j) ( 1 + Ri )
t + jRn = n --------------------
j
( 1 + Rj )
Purpose Formula
Purpose Formula
Miscelaneous Formulae
Margin Call Trigger Price IM% – 1
P M = ------------------------ × P 0
Note: IM% is the initial margin supplied, MM% – 1
MM% is the maintenance margin
requirement, P0 is the initial value of the
portfolio
Percentage gain to recover (% GTR) from a 1 -–1
loss (%L) %GTR = ----------------
1 – %L