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Introduction to R for Quantitative Finance by Zsolt Tulassay, Dr. Kata Váradi, Péter Csóka, Michael Puhle, Márton Michaletzky, Gergely Daróczi, Dr. Edina Berlinger, Daniel Havran, Agnes Vidovics-Dancs

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Chapter 2. Portfolio Optimization

By now we are familiar with the basics of the R language. We know how to analyze data, call its built-in functions, and apply them to the selected problems in a time series analysis. In this chapter we will use and extend this knowledge to discuss an important practical application: portfolio optimization, or in other words, security selection. This section covers the idea behind portfolio optimization: the mathematical models and theoretical solutions. To improve programming skills, we will implement an algorithm line by line using real data to solve a real-world example. We will also use the pre-written R packages on the same data set.

Imagine that we live in a tropical island and have only USD 100 to invest. ...

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