What should be the coefficient of utility-adjusted Return?
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Loading ...Sometimes I see 0.005 and sometimes 0.5. Which is correct?
February 26th, 2009 in
CFA - LEVEL 3, Question Posted by vidas
Utility-adjusted return is defined as:
U = R – 0.005*A * variance
If you use percentage form for U, R and variance, then the coefficient is 0.005. If you use decimal for all of them, then the equation becomes:
U = R – 0.5 *A *variance