Assume the returns of n stocks are random variables of the form , where and and B is a real number.
Consider a portfolio where are the weights.
b. Write down the Lagrange multipliers system for finding the minimum variance portfolio with covariance matrix C subject to the constraints and .
c. Solve the system found in b in terms of C and B (do not use the explicit form of C).
I am unsure of the Lagrange multiplier setup.
How does the lagrange setup help in this situation?
So i know that is needed in order to find the minimum variance portfolio, but I don't know how to multiply this out while keeping C intact. Any help will be appreciated. Thanks in advance.