# Tracking risk

How did they calculate tracking risk in problem 1 reading 28 page 51 of Fixed Income SS 9 in EOCQ?

I didn’t look at the question… but isn’t tracking risk just the Variance of the fund/portfolio with the benchmark that its trying to mimic?

CF_AHHHHHHHHH Wrote: ------------------------------------------------------- > I didn’t look at the question… but isn’t tracking > risk just the Variance of the fund/portfolio with > the benchmark that its trying to mimic? It’s the standard deviation of the active return (Return of P - Return of B)

I know I am doing a silly mistake here but still not getting the given answer. Active Return per period = 0.1% and sum of squared deviation is 0.0004% FInd tracking risk.

what is n?

6

Already tried that, not working. There must be an error in the book somewhere - I’ve been staring at this for about ten minutes now. I know I know how to calculated tracking/active risk, so I’m just gonna forget about it.

Slash Wrote: ------------------------------------------------------- > CF_AHHHHHHHHH Wrote: > -------------------------------------------------- > ----- > > I didn’t look at the question… but isn’t > tracking > > risk just the Variance of the fund/portfolio > with > > the benchmark that its trying to mimic? > > It’s the standard deviation of the active return > (Return of P - Return of B) hahah same thing right?? (kidding)

CF_AHHHHHHHHH Wrote: ------------------------------------------------------- > Slash Wrote: > -------------------------------------------------- > ----- > > CF_AHHHHHHHHH Wrote: > > > -------------------------------------------------- > > > ----- > > > I didn’t look at the question… but isn’t > > tracking > > > risk just the Variance of the fund/portfolio > > with > > > the benchmark that its trying to mimic? > > > > It’s the standard deviation of the active > return > > (Return of P - Return of B) > > > hahah same thing right?? (kidding) Variance, standard deviation, covariance… all the same

I think you divide the sum of the squared by n. Then you take the square root and that is your tracking error. Hope that helps.

thanks deep. It worked