There are three horses in the race Redeeming Vices, Gwendolyn, and Ernest. The Odds (net returns…

There are three horses in the race Redeeming Vices, Gwendolyn, and Ernest. The Odds (net returns for a winning unit bet) on offer for these runners are 1,2, and 4, respectively, and the respective ‘true’ probabilities are 0.6, 0.3, and 0.1.

1. Find the optimum allocation for the 3-asset portfolio of bets, from the Optimal growth perspective

2. Show that the expected returns for the 3 runners are (respectively) 0.2, -0.1, and -0.5.

3. Show that the variances are (respectively) 0.96,1.89,2.25 and the covariances are (1 with 2) -1.08, (1 with 3) -0.6, and (2 with 3) -0.45.

4. Find the Minimum Variance Portfolio for the 3-asset portfolio of bets.

5. For each of the possible values of Expected Return -0.5,-0.4,-0.3,-0.2,-0.1,0,0.1,0.2 find the portfolio of minimum variance and plot the corresponding Minimum Variance Set in the Mean-SD plane.

We use coding using julia and jupyter notebook

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