CFA Level I · CFA Level I Exam · Portfolio Management: An Overview
A portfolio manager follows a calendar-based rebalancing policy, restoring target weights on the last day of every quarter. Compared with a percentage-range (corridor) policy, the calendar approach is most likely to:
Calendar rebalancing most likely requires less continuous monitoring, because weights are reviewed only on scheduled dates. Its drawback is that it may not react to large moves between dates, whereas a corridor policy trades only when a band is breached.
- Atrade only when an asset class breaches its tolerance band
- Brequire less continuous monitoring of portfolio weightsCorrect
- Creact faster to large market moves between review dates
Explanation
Calendar rebalancing occurs on fixed dates, so weights need only be checked then. It can miss large drifts between dates, which is a corridor policy's advantage. Trading only on band breaches describes the corridor policy.
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