medium · Quantitative Finance
If an estimated covariance matrix is not positive semi-definite (often due to asynchronous data), why is it considered invalid for portfolio optimization?
- It prevents the calculation of the expected return.
- It could lead to a portfolio having a negative variance.
- It implies that all asset correlations are equal to zero.
- It ensures that the Sharpe Ratio is always maximized.
Sign up free to see the explanation and track your rank →
More Quantitative Finance practice
- If the underlying stock price S moves by +$2.00 over a very short interval, what is the es
- What is the estimated OLS slope hatβ?
- If the flat yield curve is at 4% (continuously compounded), what is the bond's price?
- As the number of assets n approaches infinity, what happens to the total portfolio varianc
- What is the fair no-arbitrage price for a six-month (T = 0.5) forward contract?
- If the risk-neutral probability of an up move is p = 0.6 and the risk-free rate is zero, w
- When pricing a 'Digital' (or Binary) call option near expiry with the spot price very clos
- Calculate the price of a zero-coupon bond that pays $1000 in two years, given that the one