hard · Quantitative Finance
An investor has a risk-aversion coefficient γ = 3. They trade a stock with μ = 0.10, σ = 0.20 and a risk-free rate r=0.04.
According to the Merton portfolio problem, what is the optimal fraction of wealth to invest in the risky asset?
- 1.00
- 0.50
- 0.33
- 0.75
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