easy · FRM Part 1 Foundations of Risk Management
In the context of the CAPM, what is the definition of 'Alpha' (α)?
- The ratio of expected return to the asset's total volatility, or Sharpe ratio.
- The slope coefficient of the Security Market Line itself.
- The sensitivity of an asset's expected return to changes in the risk-free rate.
- The difference between the actual expected return and the CAPM-required return.
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