Efficient Portfolio of Risky and Risk Free Assets - 2023.2 English

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Release Date
2023.2 English

This is the asset and risk free weight distribution that minimises portfolio risk given a risk free rate and a target portfolio return.

The total wealth is split between the tangency portfolio and the risk free asset.

It is calculated as:

\(Tangency\, Weight = \frac{Target\, return - r_f}{Expected\, return - r_f}\)

And \(Asset\, Weights = Tangency\, Weight.x_T\) where \(x_T\) is the Tangency Portfolio weights vector

And \(Risk\, Free\, Weight = 1 - Tangency\, Weight\)