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Return and Variance 7
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Lecture1.1
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Lecture1.2
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Lecture1.3
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Lecture1.4
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Lecture1.5
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Lecture1.6
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Lecture1.7
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Solving Equations 5
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Lecture2.1
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Lecture2.2
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Lecture2.3
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Lecture2.4
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Lecture2.5
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Capital Allocation Line 6
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Lecture3.1
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Lecture3.2
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Lecture3.3
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Lecture3.4
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Lecture3.5
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Lecture3.6
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Diversification 3
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Lecture4.1
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Lecture4.2
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Lecture4.3
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Investment Sets 3
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Lecture5.1
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Lecture5.2
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Lecture5.3
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Portfolios 7
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Lecture6.1
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Lecture6.2
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Lecture6.3
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Lecture6.4
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Lecture6.5
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Lecture6.6
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Lecture6.7
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Capital and Security Market Lines 3
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Lecture7.1
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Lecture7.2
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Lecture7.3
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Arbitrage 3
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Lecture8.1
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Lecture8.2
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Lecture8.3
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Dividend Discount Model 2
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Lecture9.1
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Lecture9.2
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Fixed Income 4
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Lecture10.1
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Lecture10.2
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Lecture10.3
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Lecture10.4
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Duration and Immunization 4
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Lecture11.1
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Lecture11.2
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Lecture11.3
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Lecture11.4
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Security Market Line
The security market line is very similar to the capital market line with one difference, it is based off of beta. It is the line that CAPM dictates.
def SML(rf,rm,label):
betas = [x/10 for x in range(21)]
assetReturns = [rf+(rm-rf)*x for x in betas]
plt.plot(betas,assetReturns,label=label)
plt.xlabel("Asset Beta")
plt.ylabel("Asset Return")
plt.title("Security Market Line")
plt.plot(1,rm,"ro")
Notice how the two lines work in a similar manner.
SML(.02,.08,"Line 1")
plt.legend()
plt.show()
SML(.02,.08,"Line 1")
SML(.04,.1,"Line 2")
plt.legend()
plt.show()
SML(.02,.08,"Line 1")
SML(.04,.08,"Line 2")
plt.legend()
plt.show()
Source Code
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Capital Market Line
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Introduction