1
$\begingroup$

Imagine market without a risk free security. How is security market line constructed? How is it interpreted?

$\endgroup$
  • $\begingroup$ No market has truly risk-free securities. They only exist in perception and for modelling purposes. $\endgroup$ – amdopt Aug 28 at 19:59
  • 1
    $\begingroup$ Use 0 as the "risk-free" rate of return? I'm not sure what you're trying to accomplish with the question. $\endgroup$ – D Stanley Aug 28 at 20:37
  • $\begingroup$ One of Fischer Black's contributions was to show that if there is no risk free asset you should use in its stead the portfolio of risky securities with the least variance (the so called GMVP). $\endgroup$ – Alex C Aug 28 at 20:55

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.