What is wrong with this sentence: ALM is used to generate a surplus efficient frontier and the minimum surplus variance portfolio becomes the optimal [edited] portfolio for that investor?
I’ll assume you meant “optimal” rather than “optional”?
If so, the MSV portfolio may not be the optimal portfolio for ALL investors using an ALM policy. That is the minimum risk portfolio on the surplus efficient frontier. Some investors may choose to take more surplus risk than that.
I wouldnt worry about this concept. Havent seen it in neither AM nor topic tests/mocks so far…
To answer yr question: maybe the word “optional” makes the sentence look wrong…
agree