When Defining a Change in Measure,a Redefining of the Units

question 18

Multiple Choice

When defining a change in measure,a redefining of the units in which a payoff is measured is called:

• A) Brownian motion
• B) Change of numeraire
• C) Stochastic discount factor
• D) Utility function

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Definitions:

Alpha and Beta

Measures used in finance: Alpha indicates the performance of an investment relative to a benchmark, whereas Beta measures the volatility of an investment relative to the market.

Efficiency Results

Describes outcomes achieved in a manner where resources are used optimally to produce desired outputs with minimum waste or inefficiency.

Minimum ATC

Refers to the lowest point on the Average Total Cost curve, where a firm is producing goods at the minimum possible cost per unit.

P > MC

A condition suggesting that the price of a product is greater than its marginal cost, which is often used to indicate potential profitability in a competitive market.