FoundationNumeric answer
Hedging out the market · Part 1 of 3
A signal portfolio has a market beta of 0.3 and residual volatility of 6% a year, uncorrelated with the market. The market’s volatility is 16% a year, and the portfolio’s alpha is 3% a year.
What is the portfolio’s total volatility, in per cent a year, to two decimal places?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
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Risk models: covariance estimation, VaR and expected shortfall
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