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QUESTION 3 Q 3(a) Explain the intuition behind the proposition that the riskiness of a pay-off on an asset is determined by the covariance of

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QUESTION 3 Q 3(a) Explain the intuition behind the proposition that the riskiness of a pay-off on an asset is determined by the covariance of a payoff with the discount factor, rather than with its variance. (12 marks)

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