Consider you have a 60/40 portfolio (60% bonds and 40% equity). The current annual volatility for stocks is 25% while for bonds its 10%. The past correlation is -0.2. 

• What is the Marginal Contribution to Risk of each asset?

1.1 • Considering you want to keep the same overall risk in the portfolio, but you also want that each asset contributes the same way to the portfolio risk, what weights you need to have in each asset?

1.2 ▪ Consider the possibility of using leverage and no leverage.

 
1.3 • Given the possibility that stocks and bonds correlation turns positive to 0.2, what would be your leverage then?