Time horizon risk and tracking portfolio between, investment, difference

dmrktrading

CFA text: time horizon risk is spread betwwn 30 year T-bond and 3 month T-bill , say 200 BP, so does it mean the longer the investment period, the higher the time horizon risk?

so for example, I'm risk adverse, I need YTM for 10 year T-bond to be 200 BP, but for short term bond, I can ask for 20 bp, so the difference between 200 bp and 20 bp is tome horizon risk?

is beta sensitivity in tracking portfolio all equals to 1, say E(R)=b1X1+B2X2+B3X3, b1,b2, b3 are beta, does all bata=1 in tracking portfolio?

sameeragarwal

not sure about time horizon risk.

A tracking portfolio is a portfolio with the same sensitivity to certain factors as the benchmark you are comparing it too. Doesn't have to be one, just as sensitive as the benchmark.

A factor portfolio has a sensitivity of 1 for 1 factor and 0 exposure to all others.