tracking-error

Hi all, Kindly refer to the attach taken from FRM part 1 chapter 5, I have 1 question to ask regarding tracking error. 1. According to the TE formula (TE = SD(Rp - Rb)), may I know why is it Sqrt(30%^2 + 15%^2 - 2*0.014) and not Sqrt(30%^2 - 15%^2 - 2*0.014)? I supposed benchmark refers to...

Hi, In chapter 1 , Page 9 - the Market risk is explained as - "Market risk specifically depends on the context. For example, In the case of a fund, the fund may be marketed as tracking a specific benchmark. Here, market risk is important to the extent that it creates a risk of tracking error."...

Learning outcomes: Describe the three fundamental dimensions behind risk management, and their relation to VaR and tracking error. Describe risk planning, including its objectives, effects, and the participants in its development ... Describe the objectives of performance measurement tools...

Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha and describe characteristics of an effective benchmark to measure alpha...

Learning objectives: Calculate, compare and interpret the following performance measures: the Sharpe performance index, the Treynor performance index, the Jensen performance index, the tracking error, information ratio, and Sortino ratio. Questions: 20.9.1. The riskfree rate is 3.0% and the...

I'm confused on which Information Ratio to use. It appears that there are two equations. This depends on active or residual? = Alpha / Tracking Error = Rp - Rb / Tracking Error

The information ratio is active (or residual) return divided by active (or residual) risk. Active risk is also called tracking error, so the "active information ratio" is given by (active return)/(tracking error). Alternatively, a more technical approach is to use alpha (aka, residual risk) so...

Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha, and describe characteristics of an effective benchmark to measure alpha...