Can you kindly clarify as to the following terms not included under square root.
like Wi2XUi2
Or is it that the sigma i=1 to 2 & j= 1 to 2 is missing?
UL for a Portfolio of two credit assets
- Thread starter [email protected]
- Start date
Can you kindly clarify as to the following terms not included under square root.
like Wi2XUi2
Or is it that the sigma i=1 to 2 & j= 1 to 2 is missing?
Hi
Yes sigma notation is missing for n portfolio of assets term sigma(i=1 to n)sigma(j=1 to n) should come.
Thanks
Yes sigma notation is missing for n portfolio of assets term sigma(i=1 to n)sigma(j=1 to n) should come.
Thanks
Yes its correct
For 2 asset ULp=sqrt[sigma(i=1 to 2)sigma(j=1 to 2)wiwj*rho(i,j)*Uli*Ulj]
Ulp=sqrt[w1^2*Ul1^2+ w2^2*Ul2^2+2*rho(i,j)* w1w2*Ul1*Ul2]
w1=w2=.5=>Ulp=sqrt[.5^2*Ul1^2+ .5^2*Ul2^2+2* rho(i,j)* .5*.5*Ul1*Ul2]
.taking .5^2 outside the sqrt becomes .5 =>
Ulp=.5*sqrt[Ul1^2+ Ul2^2+2* rho(i,j)* Ul1*Ul2] .
Thanks
For 2 asset ULp=sqrt[sigma(i=1 to 2)sigma(j=1 to 2)wiwj*rho(i,j)*Uli*Ulj]
Ulp=sqrt[w1^2*Ul1^2+ w2^2*Ul2^2+2*rho(i,j)* w1w2*Ul1*Ul2]
w1=w2=.5=>Ulp=sqrt[.5^2*Ul1^2+ .5^2*Ul2^2+2* rho(i,j)* .5*.5*Ul1*Ul2]
.taking .5^2 outside the sqrt becomes .5 =>
Ulp=.5*sqrt[Ul1^2+ Ul2^2+2* rho(i,j)* Ul1*Ul2] .
Thanks
Yes, apologies, it's a typo, I am editing the document to fix that but also include some elaboration on the UL calculations, we will republish it Monday. Apologies for the confusion
Similar threads
