Timeline for How can I find the portfolio with maximum Sharpe Ratio - Using Lagrange Multipliers
Current License: CC BY-SA 3.0
4 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Apr 8, 2018 at 12:46 | vote | accept | Zac | ||
| Apr 6, 2018 at 17:44 | comment | added | Tim Wilding | I think that’s the wrong approach. Your Lagrangean is $L(x, \kappa, \lambda_1, \lambda_2)$, and you should be solving for $(x, \kappa, \lambda_1, \lambda_2)$. Hence, your $A$ matrix should be $ (N+3) \times (N+3)$. There should be an extra row for $ \frac{\partial L}{\partial \kappa} = \lambda_1$. Your $b$ values should be all 0, apart from the $\lambda_2$ entry, which should be 1. | |
| Apr 6, 2018 at 14:44 | comment | added | Tim Wilding | The formulation allows for a variable $\kappa$ that can take any positive value. In your code, you are using $\kappa$ as a constraint in your Lagrangean, when you should be augmenting your solution vector with a $\kappa$. In other words, you should be solving for $(x, \kappa)$ rather than $x$. | |
| Apr 6, 2018 at 10:19 | history | answered | Tim Wilding | CC BY-SA 3.0 |