COM 240 Chapter Notes - Chapter 12: Implied Volatility, Volatility Risk, Risk Premium

• School: University of Victoria
• Department: Commerce
• Course: COM 240
• Professor: Majerbi Basma

Document Summary

Com 240 - chapter 12: lessons from capital market history: nancial (capital) markets: source of funding for businesses/governments, & investment opportunities for individuals/institutions. Made up of creditors & shareholders: required return: the minimum annual % earned by an investment that will induce individuals/companies to invest into a particular security or project. Depends on the risk of the investment. Can be represented in difference ways: dollar returns your amount of gain (or loss) from an investment. Typically has 2 components: income component - cash you receive directly while owning the investment (i. e. dividends) (1) (2) capital gain/loss - amount that the value of the asset you purchased changes. Total dollar return = dividend income + capital gain (or loss: percentage returns summarizes how much we get for each dollar we invest, as a % Percentage return = [(purchase price) - (current market value)] (current market value) Returns are usually referring to the past.