Hello David,
For the portfolio UL calculation, I know the formula doesn’t include it, but can you explain why if it is a 2 asset portfolio, and we’re treating UL of individual position as stdevs, are we not including the weights in the formula (ie. sqrt(0.5^2(UL^2)+0.5^2(UL^2)+2(p)(UL)(UL)(0.5)(0.5))?
This looks similar to portfolio stdev calculation, and so that makes me wonder..
Thanks!
For the portfolio UL calculation, I know the formula doesn’t include it, but can you explain why if it is a 2 asset portfolio, and we’re treating UL of individual position as stdevs, are we not including the weights in the formula (ie. sqrt(0.5^2(UL^2)+0.5^2(UL^2)+2(p)(UL)(UL)(0.5)(0.5))?
This looks similar to portfolio stdev calculation, and so that makes me wonder..
Thanks!