No return in
1st yr
Just need to find x0 then others will
automatically follow.
Doubt
By nominal interest
rate
By real interest
rate
1 is S&Ps
E(x**2) etc alpha will become square right?
Of A
0.25
Var = sd**2 = risk**2
Sigma is risk of that stock. And
W is wieght if that stock
Cov of x,y
How -- doubt
Doubt
Weight of each
Total terms = n*n
by choosing for n
stocks n times.
Repeated var**2
will occur n times
out of those.
Rem terms =
n**2-n and
Each. Have
Sigma,ij where
i!=j
So cov
=0.3sigma**2
and hence our
eqn is formed.
Weights. Written opp here
Opposite portfolio sd/ sum
of both sds
dsigna/dr =0
A and B two riskfree
asset extremes
Means no riskfree assets--> max sd and max
risk
ri
Conditio. For efficiency?
61
99.6%
Check pg37
Slope
efficient
frontier curve
Derivation...
Bit like rho
Than market
Means
>1 -->
return
net
(excess)
> risk
involved
And <1
--> return
net(exce
ss)<risk
involved
How to find
Estimated beta.
Risk factor of stock i.
Jensen alpha
Adding one
on every
return rate
as present
value is
there
already
Therefore higher
utility function
valuation gives
better yeild
Risk neutral ?
Mean
Expectations
Very
important
and
comprehe
nsive
In year