hard · Quantitative Finance numerical
In the matrix equation for the efficient frontier w = λ Σ^-1μ + γ Σ^-1mathbf1, the constants λ and γ are determined by the target return and the budget constraint.
If we only solve for the Global Minimum Variance portfolio, what is the value of λ?
- 1
- The risk-free rate r_f.
- A/B (where A=mathbf1^topΣ^-1mathbf1 and B=mathbf1^topΣ^-1μ).
- 0
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