σ_{AT}=
Total after-tax
standard deviation σ_{I }=
Income before-tax standard
deviation σ_{G }=
Capital Gains before-tax standard deviation ρ_{IG }=
Income and Capital
Gains before-tax correlation t_{i }=
Income tax rate t_{G }=
Capital Gains tax rate T_{ }=
Turnover

From a practical standpoint, estimating the Income and
Capital Gains correlation, ρ_{IG} is difficult and
often inaccurate.In most cases,
simplifying to a Price Risk model or Reinvestment Risk model yields more
accurate results.

The Price Risk model assumes only the capital gains
return is random.This assumption is
useful for assets with long investment horizons, variable market prices and
relatively fixed income streams such as stocks.After-tax Risk is

σ_{AT} = (1 – Tt_{G }) σ_{T}

σ_{T }=
Total after-tax standard deviation σ_{T }=
Total before-tax standard
deviation t_{G }=
Capital Gains tax rate T_{ }=
Turnover

The Reinvestment Risk model assumes only the income
return is random.This assumption is
useful for assets with short investment horizons, variable income reinvestment
rates and relatively fixed prices such as T-bills.After-tax Risk is

σ_{AT} = (1 – t_{I }) σ_{T}

σ_{AT }=
Total after-tax standard deviation σ_{T }=
Total before-tax standard
deviation t_{i }=
Income tax rate