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Investment Math edited untitled.md
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Rebalancing does not need to have a contrarian flavour. For this reason, the claim that rebalancing has benefits is empty. It needs further qualification. I illustrate this using
leverage. a leveraged portfolio.
As usual, I take a world with two assets, cash bearing zero interest rate and a risky asset with price \(p\). At inception, investment is initiated with one dollar. The initial price is \(p_{0}=1\).
The initial amount is leveraged to reach an exposure to the risky asset of \(\pi>1\). The position in cash is thus \(1-\pi<0\).