Suppose an investor allocates his wealth among 2 risky assets. The investor's aim is to design his portfolio such that it has the smallest variance possible. Derive the set of portfolio weights he should choose and interpret your result. 

Using the result from compute the optimal weights to achieve the global minimum variance if the volatilities of the first and second assets are 24% and 32% respectively and their correlation is 0.5.

 Explain whether the results are reasonable?

Answer rating: 100% (QA)

To derive the set of portfolio weights that minimize the variance we can use the concept of portfolio optimization and the principles of Modern Portfo... View the full answer