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Risk & Portfolio

Capital Market Line

Also called: CML, capital allocation line

The capital market line joins the risk-free asset to the tangency portfolio, showing the best return available at each level of total risk once borrowing and lending are allowed. Its slope is the market's Sharpe ratio. Its conclusion is radical and still contested: every investor should hold the same risky portfolio and adjust risk only by mixing it with cash or leverage, rather than by picking different stocks.

Where this is taught

Definitions are the trailer. These free levels turn Capital Market Line into something you play — one bite-size lesson, with worked examples, a quiz and XP.

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