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fynance.algorithms.allocation.MVP¶

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. array_like Vector of weights to apply to the assets.

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