On the basis of a one factor model, consider a portfolio of two securities with the following characteristics :
Security Factor Sensitivity Nonfactor risk proportion
A .20 49 .40
B 3.50 100 .60
A) If the standard deviation of the factor is 15% , what is the factor risk of the portfolio ?
B) What is the nonfactor risk of the portfolio ?
C) What is the portfolio's standand deviation ?© BrainMass Inc. brainmass.com February 24, 2021, 2:12 pm ad1c9bdddf
If you can't read the following properly, you can turn to the attached MSWord File.
<br>In a one-factor model, a portfolio's factor risk is expressed as bp^2σF^2. Since the sensitivity of the ...
This a three-part problem which calculates the factor risk, the nonfactor risk and the standand deviation of a portfolio of two securities.