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How to Scale Autocorrelated Returns?

FRM Exam, Quantitative Finance

This lesson is part 4 of 6 in the course Introduction to Quantitative Finance

We know that the square root rule can be used to scale volatility with time. This rule assumes that the returns are independent and identically distributed. However, this assumption is not very realistic.

This video illustrates a scaling factor that adjusts the square root rule for for autocorrelation.

This video is developed by David from Bionic Turtle.

Previous Lesson

‹ Why Use Lognormal Returns in Finance (Stock Prices)?

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Arithmetic Vs. Geometric Stock Returns ›

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In this Course

  • What is Volatility?
  • What is the Square Root Rule?
  • Why Use Lognormal Returns in Finance (Stock Prices)?
  • How to Scale Autocorrelated Returns?
  • Arithmetic Vs. Geometric Stock Returns
  • Extreme Value Theory

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