Assume you have a portfolio of 50% Treasury 10 year (you represent it by a 10 year treasury return series). 30% in equities represented by the S&P 500 and 20% in oil represented by the time series ETF with symbol OIL.
a. Download the series into excel and determine the covariance matrix of these assets
b. Using the formula for TE we discussed in class find the TE for the portfolio above
c. Calculate the risk decomposition of this portfolio manually
d. What is the top risk contributor? Does it have the maximum weight
e. Use R functions to compute the risk decomposition as we did in class