Risk & Portfolio Management
3 terms
Inflation Risk
Risk & Portfolio Management
%
The risk that rising prices erode the purchasing power of an investment's returns.
Real Return = (1 + Nominal Return) / (1 + Inflation Rate) - 1
Information Ratio
Risk & Portfolio Management
ratio (x, times)
Return above a benchmark per unit of tracking error.
Information Ratio = (Portfolio Return - Benchmark Return) / Tracking Error
Interest Rate Risk
Risk & Portfolio Management
%
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