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Risk & Portfolio Management

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Risk & Portfolio Management

Inflation Risk

The risk that rising prices erode the purchasing power of an investment's returns.

Real Return = (1 + Nominal Return) / (1 + Inflation Rate) - 1 % Risk & Portfolio Management

Information Ratio

Return above a benchmark per unit of tracking error.

Information Ratio = (Portfolio Return - Benchmark Return) / Tracking Error ratio (x, times) Risk & Portfolio Management

Interest Rate Risk

The risk that changes in interest rates reduce the value of an investment or raise the cost of borrowing.

Approximate Price Change = -Modified Duration x Change in Yield %