Finite and Constant in Quant understand, numbers, about

segalm

In Reading 11, the book takes about numbers that are finaite and constant. I understand finite, but what does "constant" mean? Thx.

zhaoyp

constant means that the value does not change and remains the same.

iteracom

Hi Thx for the info. I was hoping it wasn't that simple. Can you give an example where the variances are not constant? (This is from book one on page 285.)

Otabek

I've already passed all the CFA exams so good luck making me find that in a CFA textbook :-P

Where variances are not constant would be with GARCH models which is caused by volatility clustering. We use GARCH models to generalize and make a more accurate variance estimate since market volatility and correlations rise significantly during times of stress. Assuming a constant variance can lead you to underestimate risk during volatile markets and overestimate risk during stable markets.

WarrenB1

joec4256 Wrote:
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> Hi Thx for the info. I was hoping it wasn't that
> simple. Can you give an example where the
> variances are not constant? (This is from book one
> on page 285.)


Stock prices for starters!