Risk & Portfolio Management

The set of portfolios offering the highest expected return for each level of risk.

Test: no other portfolio offers a higher expected return at the same standard deviation, or the same return at a lower one qualitative

Money held in safe, immediately accessible instruments to cover unexpected expenses or loss of income.

Target Emergency Fund = Monthly Essential Expenses x Number of Months of Cover Required ₹

Risk & Portfolio Management

The additional return investors require for holding equities rather than the risk-free asset.

Equity Risk Premium = Expected Market Return - Risk-Free Rate %

Risk & Portfolio Management

The risk that a specific identifiable occurrence causes a sudden large move in a security's price.

Test: a scheduled or plausible discrete event exists whose outcome would materially change the security's value qualitative

Risk & Portfolio Management

The average result per trade of a strategy, combining win rate with the sizes of wins and losses.

Expectancy = (Win Rate x Average Win) - (Loss Rate x Average Loss) ₹