multifactor model & covariance between markets

CFA Level III
#1

Are you gonna memorize it? Or you have an alternative way to “attack” it?

#2

Just remember the crosses in the second part. Otherwise it is pretty straightforward.

#3

[Factor one * (Beta(a)(b)] + [Factor two * (Beta©(d)] + [Covariance Factor, (Beta(a)(d) + Beta(b)©]

#4

cov(i,j) = sum[bi*bj*cov(Fm, Fn)] Market i,j Factor m,n = {1,2} – Isn’t it much simpler than a micro attribution.:slight_smile:

#5

Beta(1) * Beta(2) * Variance / Sd1 * Sd2 = correlation.

#6

come on guys, stop joking

#7

pfcfaataf Wrote: ------------------------------------------------------- > come on guys, stop joking What are we joking about?

#8

Correction: cov(i,j) = sum[b(i,m)\*b(j,n)\*cov(Fm, Fn)] Market i,j Factor m,n = {1,2}