medium · Private Credit & Debt portfolio-management-monitoring-workouts
A portfolio of direct loans has a measured standard deviation of 3%. The investor's consultant notes that the returns exhibit a first-order serial correlation of $0.40.
What is the likely 'Unsmoothed' volatility of the portfolio?
- Significantly higher than 3%.
- Exactly 3%.
- 1.2%, calculated as 3% × 0.4.
- Lower than 3%.
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