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Derivatives

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  • September 16, 2021
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Harmonic Average

An average that is computed by taking the inverse of the arithmetic average of inverse values, as in the following formula:

n/[(1/r1)+ (1/r2) +….. + (1/rn)]

Where: n is the number of observations, and r denotes a specific rate.

The harmonic average is usually used to valuate certain non-standard options.


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