Example function

Analytica User GuideExample function

The following function, Capm(), computes the expected return for a stock under the capital asset pricing model.

Parameters

It has three parameters, rf, rm, and beta. The parameter qualifier Number says that it expects that the parameters are numbers.

Description

The description says what the function returns and what its parameters mean.

Definition

The definition is an expression that uses its parameters, rf, rm, and beta, and evaluates to the value to be returned.

Sample usage

You use the Capm() function in a definition in the same way you would use Analytica’s built-in functions. For example, if the risk free rate is 5%, the expected market return is 8%, and Stock-Beta is defined as the beta value for a given stock, we can find the expected return according to the capital asset pricing model as:

Stock_return: Capm(5%, 8%, StockBeta)

The function works equally well when StockBeta is an array of beta values — or if any parameter is an array — the result is an array of expected returns.

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