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#SCHWESER QUICKSHEET LEVEL 1 PDF PROFESSIONAL#ĪRCH: detected by estimating: εˆ 2t = a 0 + a1εˆ 2t−1 + µ t Variance of ARCH series: σˆ 2t +1 = aˆ 0 + aˆ1εˆ 2t Risk Types: Appropriate methodĭistribution Accommodates Sequential? of risk Correlated Variables?ĮCONOMICS bid-ask spread = ask quote – bid quote Cross rates with bid-ask spreads:  A        =  A  ×  B   C   B   C  bid bid bid  A   A   B    =   ×    C   B offer  C offer offer Currency arbitrage: “Up the bid and down the ask.” Forward premium = (forward price) – (spot price) Value of fwd currency contract prior to expiration: Vt = Seasonality: indicated by statistically significant lagged err.