On page 250 of the first book they go on to explain how the after-tax risk of the portfolio is reduced with accrual taxes since the government assumes a portion of the risk...
the formula given in the first example completely disregards the 3rd portion of the typical formula used to calculate portfolio variance/standard deviation which takes into account the correlation between the 2 assets in the portfolio......
I would have thought if the correlation is assumed to be 1, that last term cannot be ignored and it is not simply the weighted average of the two.
Can someone please shed some light on this!
Cheers作者: PalacioHill 时间: 2011-7-13 16:02
Ignore this post, did it long hand and works out to be the same ....
