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- Calculate Total Constrained Weight = 10% - 17.97% = -7.97%.
- Calculate the Sum of the Total Source Weight at all Constrained Levels = 17.97%.
- Calculate the New Weights for the constrained segments/securities and those below the constraints. For example:
Total Australia Weight Change = (17.97% * -7.97%) / (17.97%)
Total Australia New Weight = -7.97 + 17.97% = 10% - Calculate the New Weights for the remaining (nonconstrainednon constrained) levels. For example:
Total UK Weight Change =1*((21.65% * -7.97%)/(1 17.97%)) = 2.10%
Total UK New Weight = 2.10% + 21.65% = 23.75% - Copy all security and segment returns, except those for the constrained level and above.
For example: Total UK Return = 3.475919
Returns above the constrained node are recalculated — in the example in the following table, only the Total return is recalculated.
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