Hi,
Regarding the formula for portfolio risk wiht many assets (p. 6 of Jorion/VaR study notes), the text says the following:
"It is evident from the formula above, that the portfolio risk, sigma_ p, tends to zero as N increases".
Shouldn't rhe risk converge to the product of sigma and the square root of the correlation?
Thanks
Regarding the formula for portfolio risk wiht many assets (p. 6 of Jorion/VaR study notes), the text says the following:
"It is evident from the formula above, that the portfolio risk, sigma_ p, tends to zero as N increases".
Shouldn't rhe risk converge to the product of sigma and the square root of the correlation?
Thanks