Covariance defined In probability theory and statistics, covariance measures the comovement between two variables i.e. the amount by which the two random variables show movement or change together. If the two variables are dependent then the covariance can be measured using the following formula: For two independent variables the joint densities are separated and the […]
Basic Statistics - FRM
Interpretation of Skewness, Kurtosis, CoSkewness, CoKurtosis
Kurtosis It indicates the extent to which the values of the variable fall above or below the mean and manifests itself as a fat tail. Within Kurtosis, a distribution could be platykurtic, leptokurtic, or mesokurtic, as shown below: If returns very high above or below the mean occur very frequently then the distribution is […]
Best Linear Unbiased Estimator (B.L.U.E.)
The Need There are several issues when trying to find the Minimum Variance Unbiased (MVU) of a variable. The Probability Density Function (PDF) is not known It is difficult to model the PDF Even in cases where the PDF is known it is difficult to arrive at the estimate of the minimum variance The intended […]