Question I
Suppose you have a two-stock portfolio and you have the following information (using daily returns):
Mean stock 1 (Average Mean Return, AMR) = 0.05%
Mean stock 2 (AMR) = 0.12%
Standard deviation returns for stock 1 = 1.20%
Standard deviation returns stock 2 = 1.80%
Correlation (Rho) between the 2 stocks +50% (i.e. +0.50)
What is the co-variance between stock 1 and 2?
Question II
Find element (entry or cell) a12 in the upper triangular matrix of the Cholesky decomposition.
Question III
Find clement (entry or cell) a22 in the upper triangular matrix of the Cholesky decomposition.