Let A and B be two risky assets with variances sigma ^2 A and sigma^2 B, respect

Question

Let A and B be two risky assets with variances sigma ^2 A and sigma^2 B, respectively and covariance sigma AB . Suppose the portion w1 is invested in A and the portion w2 is invested in B. The goal here is to find w 1 min and the values of w1 and w2 that correspond to the global minimum variance portfolio when we mix these two assets. The constrained optimization problem to be solved is then subject to w1 + w2 = 1 where Using the method of Lagrange multipliers technique discussed in class, show that the minimum is achieved at

Explanation / Answer

Please let us know what is thaught in the class, because without knowing exact method thaught we wont be able to solve the solution.

Refer to below mentioned PDF for more information and example solutions of Lagrange multipliers technique:

http://faculty.washington.edu/ezivot/econ424/introductionPortfolioTheory.pdf

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