I'm looking for the solution to a practical maths problem that is way beyond my level of competence
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I'm looking for the solution to a practical maths problem that is way beyond my level of competence

[From: ] [author: ] [Date: 13-05-04] [Hit: ]
but that was 20 years ago and after attempting this Ive realized it is beyond my scope..I have 3 known inputs, LongStdDev, ShortStdev and MarketStdev.And I have two targeted inputs,......
I'm not sure if this is the appropriate site to pose this, and if its not I'm open to suggestions of sites where I could directed it.

The problem below I thought at first this would be a fairly simple, but it turns out to be a lot more complicated than I first imagined. I was good at maths at school, but that was 20 years ago and after attempting this I've realized it is beyond my scope..

I have 3 known inputs, LongStdDev, ShortStdev and MarketStdev. And I have two targeted inputs, PortfolioBeta and PortfolioStdev.

I only have two variables, LongWeight and ShortWeight.

PortfolioBeta = LongWeight - ShortWeight
PortfolioStdev = Sqrt((LongWeight*LongStdev)^2 + (ShortWeight*ShortStdev)^2 +
(abs(LongWeight-ShortWeight)*MarketStdev…

From these two formulas and five inputs is it possible to calculate the LongWeight (and by Inference the ShortWeight)? Trying to use what I remember from high school maths I hit a wall when I try to substitute {PortfolioBeta-LongWeight} for {ShortWeight} and then square it.

-
PortfolioBeta = LongWeight - ShortWeight

LongWeight = beta - short weight

PortfolioStdev = Sqrt(((beta - short weight)*LongStdev)^2 + (ShortWeight*ShortStdev)^2 +
(abs(beta)*MarketStdev)

now you have a formula with only one variable!
square both sides, plug the numbers that you know,

you will eventually get to:

A ShortWeight^2 + B SortWeigth + C = 0

Jam that into the quadratic formula Sw = ( -B +- sqrt(B^2 - 4AC))/2A
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