Mostly when you talk about the average you actually talk about the arithmetic mean. The arithmetic mean is useful if one wants to look at independent variables. Eg. for the average income of 2 different lawyers. 2000 Euro + 4000 Euro / 2 Lawyers = Lawyers average =3000 Euro The geometric mean ensures that the ratio of each number towards […]
If you want to represent a lot of data in one table you could use ways such as a histogram. A histogram separates your data points into groups and shows you how many data points are in each group. Therefore a histogram shows you the relative frequency of data values. Additionally, a histogram is a great tool to look at […]
Variance is a measurement of distribution. Variance measures the dispersion of observations from their mean value (mü). The higher the variance, the more dispersed the observations are from their mean. Formula in case you have 3 observations : ((observation point 1 – mean) + (observation point 2 – mean) + (observation point 3 – mean))^2 / n (n means number […]
Normal distributions.) Are unimodal – they have one “high” peak.) Symmetrical shaped – mean mode median are the same An example for normal distribution would be the size of male students. To calculate the expected value, you calculate the weighted mean. -> probability * value (eg size) Eg. 0,1 * 1 + 0,2 * 2 … The expected value is […]
Mean, Median, Mode -> these are measures of central tendency Variance, Standard Deviation, Range, Minimum, Maximum, Kurtosis, Skewness -> these are dispersion measures
Nominal: A ranking/order of the variables is not possible and ther is no standardized difference between th variables. Eg. colours (blue, red etc.) Ordinal: A ranking/order of the variables is possible, but there is no standardized difference between th variables. Eg. schoolgrades from 1-5. Like the difference between 1 and 2 isnt exactly the same as the difference between 3 […]
The buyer of a forward rate agreement (FRA) locks in (secures) an interest rate. He protects himself against rising rates but, on the other side, also doesn’t profit from falling ones. The seller of an FRA is secured against falling interest rates as he invests the money at the locked-in interest rate.
If a call option is in the money, its strike price is lower than the underlying price. Formula: Underlying – Strike Price = Positive If a put option is in the money, it means that its strike price is higher than the price of the underlying. Formula: Strike Price – Underlying = Positive If an option is at the money, its strike price and underlying […]
If you are worried about interest rate fluctuations (eg. you want to buy a bond or take on a credit) you might use one of the following instruments: Cap If you are worried about rising interest rates (eg. you want to buy a bond) then a Cap might be the right thing for you. How does it work: If the […]
The European central bank (ECB) has 3 main ways to increase/decrease the money supply and : 1) Open market operations The main instrument for the ECB for controlling the liquidity on the market is “open market operations”. Their aim is to achieve a balance between liquidity demand and liquidity supply at a specified interest rate. Open market operations are usually […]