New answers tagged investment
3
The trade-off between risk and expected returns depends on your own preferences.
Assume that you are expected utility maximizer and let the return of the investment be given by the random variable $X$. Your utility is given by.
$$
\mathbb{E}(u(X))
$$
Let $\mu$ be the mean of $X$ and let $\sigma^2$ be the variance of $X$ then taking a Taylor expansion of $u(x)...
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