Stalla Mock has this question In developing firm-wide exposure limits for each portfolio manager, Jeffers would be most likely to use each manager’s portfolio: 1) Value at Risk 2) Standard Dev 3) Information Ratio 4) Correlation-adjusted information ratio I went with VAR and got it wrong. the answer given is Correlation Adjusted IR I don’t see correlation adjusted IR anywhere in the textbooks…??? is it there ?
i have heard of correlation with sharpe ratio, but this I have not heard of either in schweser or cfai material. anyone else? although the concept makes sense to see if each PM is adding real alpha to the whole firm’s required return.
this is probably some outdated stuff they threw it in. Stalla level 3 is filled with errors: in another questions they have 95% confidence interval -> mean ± 1.65 standard deviation, instead of 1.96 SD
for 5% VAR, you would actually will use 1.65, since VAR is one sided, and 1.65 corresponds to 95% one sided confidence interval, 1.96 is for two sided confidence interval or for 97.5% one sided
i am losing my sanity.