The formula for the standard deviation of cash held by the centralized depository for N affiliates is $\sqrt { ( \text { Std. Dev. Affiliate } 1 ) ^ { 2 } + ( \text { Std. Dev. Affiliate } 2 ) ^ { 2 } + \cdots + ( \text { Std. Dev. Affiliate } N ) ^ { 2 } }$

Question

Quizplus · Accepted Answer

The formula assumes that interaffiliate cash flows have a correlation coefficient of 0, which means that the cash flows are uncorrelated or independent of each other. If the cash flows have a correlation coefficient of -1 or +1, the formula should be adjusted accordingly.

The Formula for the Standard Deviation of Cash Held by the Centralized