Applications in Finance

“It is interesting, chemically, no doubt,” I answered, “but practically —” Dr. Watson in “Study in Scarlet” Multivariate statistical analysis is frequently used in quantitative finance, risk management, and portfolio optimization. A basic rule says that one should diversify in order to spread financial risk. The question is how to assign weights to the different portfolio positions. Here we analyze a so-called mean-variance optimization that leads to weights that minimize risk given a budget constraint. Equivalently, we may optimize the weights of a portfolio for maximal return given a bound on the risk structure. The discussion naturally leads to links to the capital asset pricing model (CAPM).


Risk Premium Portfolio Optimization Variance Matrix Asset Return Market Index 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Springer Science+Business Media, LLC 2007

Personalised recommendations