Rebalancing ratio!

CFA Level III Fixed Income
#1

Rebalancing ratio: is it old DD / new DD

OR (old DD / new DD) -1

Schweser says the first one. Cfa 2011 exam says second. argh!

(I know how to apply it but I don’t want to lose dumb marks.)

Thanks!

#2

Rebalancing ratio: old DD / new DD

You use [(old DD / new DD) -1] X new Portfolio MV to determine the amount to buy/sell to rebalance back to old.

#3

Thanks, that’s what I thought, weird that the 2011 exam has it different

#4

Also remember, RR doesnt work if they ask controlling position. You have to take the difference of old and new and add that to the DD of the controlling position and then get the new MV needed.