Can some help me with Example 21 (p.432; Deriv. and Port. Mngmt; CFAI books)?
Where do those numbers come from:
=> Active factor risk = 30.0594
=> “Although the equity fund’s exposure to size is positive, the active exposure is negative” (? I can see the positive exposure of 0.05 on log of market cap, but what about the negative active exposure???)
=> “The largest active factor risk was (9)^(1/2)=3% p.a., so the objective was met” (whre did they get the “9” and “1/2” from??)
I got confused and I cannot figure it out…