medium · Quantitative Finance qf-core
A portfolio manager is evaluating two assets. Asset A has an expected return of 12% and volatility of 20%. Asset B has an expected return of 7% and volatility of 10%.
If the risk-free rate is 2%, which asset provides the superior risk-adjusted return according to the Sharpe ratio?
- Asset A, because it offers a significantly higher raw expected return.
- Asset B, because its volatility is half that of Asset A.
- Asset A and Asset B are identical on a risk-adjusted basis.
- Asset A, because its 'volatility drag' ((1)/(2)σ^2) is higher.
Sign up free to see the explanation and track your rank →
More Quantitative Finance qf-core practice
- If the flat yield curve is at 4% (continuously compounded), what is the bond's price?
- As the number of assets n approaches infinity, what happens to the total portfolio varianc
- What is the fair no-arbitrage price for a six-month (T = 0.5) forward contract?
- Calculate the price of a zero-coupon bond that pays $1000 in two years, given that the one
- If the risk-neutral probability of an up move is p = 0.6, what is the expected stock price
- According to the Merton portfolio problem, what is the optimal fraction π^* of wealth to h
- A portfolio has a daily expected return of 0.05% and a daily volatility of 1.2%. Using the
- If yesterday's return was 2% and the conditional variance was 0.0001, what is the updated