What is Efficient Frontier?
Efficient Frontier The set of optimal portfolios that offer the highest expected return for a defined level of risk, or the lowest risk for a given level of expected return, as established by Modern Portfolio Theory.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Efficient Frontier” Used in Practice?
Constructing the efficient frontier helps asset managers optimize portfolio allocation by balancing risk and expected return according to Modern Portfolio Theory.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Efficient Frontier?
The set of optimal portfolios that offer the highest expected return for a defined level of risk, or the lowest risk for a given level of expected return, as established by Modern Portfolio Theory.
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