Diversification Flashcards
(7 cards)
1
Q
What are the two different types of risk? How can we repreetn them?
A
2
Q
What is the formula of variance of the combination of two random variables?
A
3
Q
How can we calculate the variance using a covariance matrix?
A
4
Q
How many elements of the matrix are variances and how many are covariances? how can the limit show unsystematic risk?
A
5
Q
How can we rewrite che variance formula using correlations? What values does it take when correlation is 1,0 or -1?
A
6
Q
Show what happens to risk when we double y? Show instead what happens when we include a second risky asset
A
7
Q
What is the portfolio frontier?Whats the concept behind it?
A
