Practice
Questions
Courses
Articles
Firms
Jobs

Login
Sign up

Probability and Expectation in Finance
Return, Risk, and Time Value
Pricing and Arbitrage Logic
Portfolio Mathematics
Stochastic Modeling in Finance
Modeling Assumptions and Real-World Issues

Mean-Variance Optimization

Test your knowledge

In the mean-variance optimization problem defined by minimizing \( w^\top \Sigma w \) subject to \( w^\top \mu = \mu_p \) and \( \sum w_i = 1 \), which of the following best describes the economic interpretation of the constraint \( \sum w_i = 1 \) when short selling is allowed?

It requires each asset in the portfolio to have equal weighting, regardless of return or risk

It ensures that the portfolio is fully invested, allowing for both long and short positions as long as the net investment sums to total available capital

It prohibits short selling by ensuring that all portfolio weights are non-negative

Log in to keep track of your completed lessons

Already have an account? Login

Next: Efficient Frontier and Capital Market Line

Recommended Brainteasers

Practice what you've learned with these related brainteasers

Index Option Dynamics I
Option Theory
Targets on a Line 3
Probability
Index Options Dynamics II
Option Theory
Minimizing Variance
Statistics
Coordinate Variance
Math

- The Netherlands
- KVK 86191128
- UK VAT 456 4977 42
- NL BTW NL863890350B01
Links
Mental Math
Online Assessments
- Da Vinci Trading
- Susquehanna International Group
Sequences
Interview Resources
Knowledge Base
Legal

© 2025 Tradermath. All Rights Reserved