Portfolio Management: Calculation of Variance of Portfolio

Subwoofer: Finance Question:

Calculation of variance of portfolio.

Matter: Portfolio supervision

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Assume there are 3 risky possessions, A, M and C with the next expected comes back, standard deviations of earnings and correlation coefficients. Electronic (rA)= 4% E (rB)=5% E (rC) =15% H. DEVA=5% T. DEVB=7% S. DEVC=10% A, B=0. six A, C=-0. 2 N, C=0. 3

QUESTION one particular: Solving intended for the Global Bare minimum Variance Profile Consider a world where there are no risk free property, and just these kinds of three risky assets. Suppose short sales are allowed. Solve intended for the weights and variance with the global minimum variance stock portfolio. If short sales are not acceptable is the answer affected?

Remedy:

Global Lowest Variance Profile is that group of portfolios that may provide the minimal level of exposure to possible a given standard of expected come back. Given a global with only the three offered risk property we can utilize Solver function in Exceed to ascertain the weights and difference of the global minimum variance portfolio. We need to calculate the Variance Covariance matrix pertaining to the provided set of assets. While variance is given by the square of Standard Deviation and is therefore entered since diagonal principles in

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Sub: Fund

Topic: Collection management

the matrix, Covariance is given by product of correlation between two possessions and the merchandise of their particular standard deviations (correlation a, b times SD a x SD b) We all then need to calculate the Portfolio Variance and Stock portfolio standard deviation. Using the variance-covariance matrix and " amount product” function in Exceed and...