What is the difference between the investment opportunity set and the capital allocation line? The CFA course material is not particularly clear about the distinction between the two.
Well I have just discovered that the capital allocation is the relationship between risk and return for a portfolio containing a risky asset and a risk free asset.
In comparison, the investment opportunity set is the set of all possible portfolios achievable by the investor and consists of two risky assets.
Feel free to correct me if I’m wrong!