Var aX bY in PRM-I Portfolio Mathematics

thomas.dallagnese
Posts: 1
Joined: Sat Mar 15, 2014 9:24 am

Var[aX+bY] in PRM-I, Portfolio Mathematics

Postby thomas.dallagnese » Sat Mar 15, 2014 11:48 am

PRM-I, Finance Theory ► Portfolio Mathematics at 22:00 in the example,
written in the document: Var[4X-3Y] = 16*Var[X] + 9*Var[Y] + 2*4*(-3) * Var[X]^(1/2) * Var[Y]^(1/2) * correlation[X,Y]
hand-written manually: Var[4X-3Y] = 16*Var[x]^2 + 9*Var[Y]^2 + 2*4*(-3) * Var[X] * Var[Y] * correlation[X,Y]

From the same video at 13:00 the one written manually looks correct.
Please confirm the correct one and correct answer to the question on the slide at 22:00

Thanks

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

Var[aX+bY] in PRM-I, Portfolio Mathematics

Postby pradeeppdy » Tue Apr 01, 2014 9:53 am

Yes, the manually written statement is correct : Var[4X-3Y] = 16*Var[x]^2 + 9*Var[Y]^2 + 2*4*(-3) * Var[X] * Var[Y] * correlation[X,Y]


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