Chapter 6 Mean-Variance Portfolio Theory

1.Proof:

Portfolio diagram lemma:
The curve in a mean-variance diagram defined by nonnegative mixtures of two assets 1 and 2 lies within the triangular region defined by the two original assets and the point on the vertical axis of height A.

Let p=1, find the upper boundary; let p=-1, find the lower boundary

2.Solution of the Markowitz problem
**Application of lagrangian**. this formular is very useful in asset pricing model.

2 assets, 3 assets and then practice on n assets. at this current stage, all assets are risky.