Advertisement

3 Two-Period Model: Mean-Variance Approach

  • Thorsten Hens
  • Marc Oliver Rieger
Chapter
  • 437 Downloads
Part of the Springer Texts in Business and Economics book series (STBE)

Abstract

The minimum–variance portfolio is the portfolio of risky assets with the minimal portfolio variance:
$$\displaystyle(\lambda _1^{MV}, \lambda _2^{MV}) = \arg \min _{\lambda } \;\sigma _\lambda ^2, \quad \text{ s.t. } 0 \le \lambda _1, \, 0 \le \lambda _2, \, \lambda _1+\lambda _2=1,$$
where the variance of portfolio λ is
$$\displaystyle\sigma _\lambda ^2 = \sigma ^2(\lambda _1 R_1+ \lambda _2 R_2) = \lambda ^T COV \lambda .$$

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  • Thorsten Hens
    • 1
  • Marc Oliver Rieger
    • 2
  1. 1.Department of Banking and FinanceUniversity of ZurichZürichSwitzerland
  2. 2.Department of Business AdministrationUniversity of TrierTrierGermany

Personalised recommendations