Consider you have a 60/40 portfolio (60% bonds and 40% equity). The current annual volatility for stocks
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Question:
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?
Related Book For
An Introduction to Management Science Quantitative Approach to Decision Making
ISBN: 978-1337406529
15th edition
Authors: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
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