**Financial processes, 2014/15 spring semester**

## Requirements for the second test

change of probabilty measures for stochastic processes, lemma between E and E tilda

Girsanov theorem

Which processes are martingale under the risk neutral measure? ( D(t)X(t), D(t)S(t) )

Fundamental factor models, decomposing stock/level covariance matrix using factor covariances and stock-specific variances. The effect of heteroskedasticity.

Combining strategies, the optimal portfolio which maximizes Sharpe ratio, rescaling benefit of mixing

Machine learning, logistic regression, difference between L1 (Lasso) and L2 (Ridge) regularization, overfit examples, hyperparameter optimalization (train, cross-validation and test sets)

Theorems and methods from homeworks