An Introduction to Portfolio Theory (UMAP)
Author: Paul R. Thie
Portfolio theory concerns balancing return and risk inthe selection of an investment portfolio. We presentan introduction to portfolio theory through an exampleinvestment problem and models for optimal portfolios.
Table of Contents:
INTRODUCTION
RETURN AND RISK
PORTFOLIO VARIANCE
THE PORTFOLIO SELECTION MODEL
LAGRANGE MULTIPLIERS
P(m) Implies L(m)
One Active Investment
L(m) Implies P(m)
Summary
RESOLUTION OF P(m) WITH THE RISK-FREE INVESTMENT
RESOLUTION OF P(m) WITHOUT THE RISK-FREE INVESTMENT
THE EFFICIENT FRONTIER
LEVERAGING
Resolution of P(m) when v1 = umax
Resolution of P(m) when v1 < umax
The Efficient Frontier with Leveraging
AN EXAMPLE WITH MUTUAL FUNDS
SOLUTIONS TO SELECTED EXERCISES
APPENDIX: GEOMETRY AND THE LAGRANGE/KKT CONDITIONS
REFERENCES
ABOUT THE AUTHOR
Mathematics Topics:
Application Areas:
Prerequisites:
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