Page 137 - PRIAA Glossary

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R SQUARED (R2)
A statistical measure representing the percentage change in a fund that is explainable by the movements in a benchmark index. The larger the value of R2, the greater the probability that observed outcomes are explained by a particular model.
The mathematical form for R2 is given by the equation below,
where SS is the sum of squares of residuals, and SS res SS
RAINBOW OPTION
An option strategy which pays out based on the performance of two or more underlying assets (known as “colours of the rainbow”). There are four types of rainbow option: “best of,” “worst of,” “maximum of” and “minimum of”.
RALLY
An upward movement of security prices. Also known as “recovery”.
RANGE
The high and low prices, or high and low bids and offers, between which a security trades over a given period of time.
RANGE ACCRUAL
A form of interest accrual in which the coupon rate is earned only on a day in which the rate from which the coupon is derived falls within a specified range.
RANGE BINARY
A range binary pays out if a specified spot rate trades within
a given range over a specified period of time, in exchange for payment of a premium. The lower the volatility of the spot rate, the more likely the buyer is to profit. See also “trigger condition”.
the total sum of squares:
is
tot
R2 = 1 – SSres tot
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