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May 10th, 2013, 06:10 AM   #1
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determine efficent frontier

Hi,
I have problem with understanding the following example:

Quote:
Consider a financial market with the asset structure .
Both states are equally likely.
a) determine the eficcent frontier if short sales are banned and if short sales are allowed.
What is matirx A? I know i need the expected returns of the assets and the variance/covariance matrix as inputs, in order to determine the efficent froniter,
but i dont get what the numbers in the matrix stand for...(because the usual numbers in the COV-matrix are given in percentages e.g. 0,25)
And what does "both states are equally likely" mean..?

Does anyone have an idea?

kind regards
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