Modern Portfolio Theory and the CAPM
Free GARP FRM Part I lesson in Foundations of Risk Management. 17 min read, ~2,563 words.
Efficient frontier = portfolios that minimize variance for each level of expected return; Markowitz's quadratic optimization. CAPM:. Single-factor model where market beta is the only priced risk. CML plots efficient portfolios in (return, total-risk) space; SML plots all assets in (return, beta) space, different x-axis, different population. Beta =. Measures...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
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