fynance.algorithms.allocation.MVP¶
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fynance.algorithms.allocation.
MVP
(X, normalize=False)¶ Get weights of the Minimum Variance Portfolio allocation.
Parameters: - X : array_like
Each column is a time-series of price or return’s asset.
- normalize : boolean, optional
If True normalize the weigths such that \(0 \leq w_i \leq 1\) and \(\sum_{i=1}^{N} w_i = 1\), \(\forall i\). Default is False.
Returns: - array_like
Vector of weights to apply to the assets.
See also
Notes
The vector of weights noted \(w\) that minimize the portfolio variance [4] is define as below:
\[\begin{split}w = \frac{\Omega^{-1} e}{e' \Omega^{-1} e} \\\end{split}\]\[\text{With } \sum_{i=1}^{N} w_i = 1\]Where \(\Omega\) is the asset’s variance-covariance matrix and \(e\) is a vector of ones.
References
[4] https://breakingdownfinance.com/finance-topics/modern-portfolio-theory/minimum-variance-portfolio/