Description

Portfolio Optimization for 4 Securities Using Lagrange Multipliers

Problem:
Construct the Optimal Portfolio that:
delivers the target return (mu_Target)
with minimum risk
Minimize the risk of the portfolio (in this case, measured as half the variance)
While maintaining an expected return target of (mu_Target)
By adjusting the investment weights on each asset
Subject to the budget constraint that the weights sum to 1
Method:
Since constraints are equalities => We can use Method Lagrange