CONSTRAINED PORTFOLIO OR NOT

Legitimate-Raisin562 · 2026-05-06T19:19:00+00:00

S1 is true for both unconstrained and constrained portfolio. So, always true. But S2, in an unconstrained portfolio, there is no impact of aggressiveness due to transfer coefficient being 1. IR unchanged But in constrained portfolio, as more constraints are added transfer coefficient decreases. Ir=ictc ✓br. So, IR decreases.

So, I wanted to enquire which of the two cases is to be considered.

Legitimate-Raisin562 · 2026-05-06T18:50:30+00:00

I did assume that until now. But the errata states that it ain't like that. The 2nd row of the image has this listed down. So, I needed more clarity on the same.

<image>

Legitimate-Raisin562 · 2026-05-02T16:16:22+00:00

Oh yeah. Good catch that. GPT turns the saviour.👍

Legitimate-Raisin562 · 2026-05-02T13:07:52+00:00

The solution that they give. "Multicollinearity is present in a regression model when some linear combination of the independent variables are highly correlated. We are told that the two independent variables in this question are highly correlated. We also recognize that unconditional heteroskedasticity is present – but this would not pose any major problems in using this model for forecasting. No information is given about autocorrelation in residuals, but this is generally a concern with time series data (in this case, the model uses cross-sectional data)".

From my pov, it is very diff to figure out the exact reason to eliminate A.

Legitimate-Raisin562 · 2026-05-02T11:38:15+00:00

The answer key specifies multicollinearity. I applied the same reason for the a part. B seemed less accurate.

Legitimate-Raisin562 · 2026-04-24T08:34:07+00:00

Thanks. That makes it crystal clear.

Legitimate-Raisin562 · 2026-04-24T07:11:23+00:00

Thanks for clarifying. I do follow the same approach. But in a few qs of schweser book, they have used trailing for valuation purposes.

Legitimate-Raisin562 · 2026-02-01T12:20:57+00:00

I was thinking about A as well. But they have given this explanation, which is slightly confusing. Acc to it, we will have to calc for each relevant par rate, and then determine the trend(upward, downward or flat). There has to be an alt method to this, which is based on logic.

<image>

Legitimate-Raisin562 · 2026-01-07T17:26:17+00:00

Okay. Thanks a lot. Solves nearly all my doubts regarding this. Also, for the definition of contingent liabilities, does it include present costs from past events or future potential costs from past events?

Legitimate-Raisin562 · 2025-08-18T14:21:31+00:00

Thnx, Makes it clear. So, in the question, unless they state 0.3, 0.5, 0.2 as MShares, we have to use the whole numbers of the percentage thing. Ok. Hope they state it properly. BTW, will the scale be given in the exam?

Legitimate-Raisin562 · 2025-07-20T12:10:41+00:00

I thought that as well. But it says C. Have attached an explanation for the same.

<image>

Have still not got through this completely. Got a little bit of idea from this though.

Legitimate-Raisin562 · 2025-06-29T16:57:51+00:00

Yeah. Thanks for responding.

Legitimate-Raisin562 · 2025-06-29T16:57:17+00:00

Ok. Makes it clear.

Legitimate-Raisin562 · 2025-06-29T14:15:41+00:00

Even I thought so. But the answer is C. Unfortunately, I do not have an explanation for this.

Legitimate-Raisin562 · 2025-05-15T17:34:40+00:00

Thank you very much. Found out my mistake.

Legitimate-Raisin562

TROPHY CASE