Portfolio variance, Counting problems, bayes Flashcards
1
Q
Covariance
A
Covariance measures how 2 assets move together. If positive, they move in same direction, if negative, they move in opposite directions. Pretty useless measurement unless standardized
2
Q
Correlation
A
3
Q
Portfolio variance
A
4
Q
Std deviation of 2-asset portfolio
A
5
Q
Bayes’ formula
A
Bayes’ formula is used to update a given set of prior probabilities for a given event in response to the arrival of new information. The rule for updating prior probability of an event is:
6
Q
When order matters,
A
use permutation
7
Q
When order is irrelevant
A
Use combination
