Tolerance width

[suspense]

What does a corridor of +/- 10% means.
I thought it means 40-60 fo a portfolio with targe of 50
I answered a question that interpret it as 45-55. it also assume that once the portfolio weight reaches 55% it must be rebalanced to the target with.
I thought rebalancing will occur at 44 and 56.
Kindly clarify.

 

[mattmania]

Yeah, it’s a little confusing. 10% of a target range of 40, for example, means that anything from 36-44 is acceptable. I’m surprised they said to rebalance once it reaches the edge of the corridor, hopefully someone else will clarify.
Also, depending on the strategy and risk tolerance it doesn’t always have to be rebalanced back to 40, sometimes just within an acceptable range.