Suppose there are two marketed assets, each with price 1 and payoffs $y_{1}$ and $y_{2}$, respectively, with

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Suppose there are two marketed assets, each with price 1 and payoffs $y_{1}$ and $y_{2}$, respectively, with $\bar{y}_{1}=1.4$ and $\bar{y}_{2}=0.8$. Each has a variance of 0.04 , and they are uncorrelated.

(a) Find the minimum-norm portfolio.

(b) Find the projection price of the risk-free asset with payoff 1.

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Investment Science

ISBN: 9780199740086

2nd Edition

Authors: David G. Luenberger

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Question Posted: Apr 19, 2024 02:00 AM

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Suppose there are two marketed assets, each with price 1 and payoffs $y_{1}$ and $y_{2}$, respectively, with

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Investment Science

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