Question
Consider the case of two financial assets and three market conditions (states). The table below gives the respective probability for each market condition and the
Consider the case of two financial assets and three market conditions (states). The table below gives the respective probability for each market condition and the return of each asset in each one of them.
Market Conditions
| State | Recession | Normal | Expansion |
| Probability of state | 30% | 40% | 30% |
| Return of asset A | -30% | 20% | 55% |
| Return of asset B | -10% | 70% | 0% |
Estimate the equation of the efficiency frontier.
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Dark Finance
Authors: Fabio Mattioli
1st Edition
1503611655, 978-1503611658
