An investment portfolio is a distribution of wealth among several financial assets such as stock, bonds, and their derivatives. The main goal of building a portfolio is to diversify risk while attaining a high level of return. However, depending on the situation and the investor’s needs, variations of this goal could be defined. Two most commonly sought goals are maximization of return for a given acceptable level of risk and minimization of risk to achieve a given required level of return. Arbitrage ensures that increasing the level of return is not possible without taking any risk.
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