Abstract
This chapter deals with the compilation of stocks into a portfolio that suits an investor’s hunger for profit, while minimizing the risk of losing the initial investment. Since the theory is based on variational methods and on Lagrange multipliers, applications of these concepts in physics are juxtaposed to their use in finance. As an extension of the portfolio theory, the basic equations of the capital asset pricing model are derived and used to value companies.
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Ziemann, V. (2021). Portfolio Theory and CAPM. In: Physics and Finance. Undergraduate Lecture Notes in Physics. Springer, Cham. https://doi.org/10.1007/978-3-030-63643-2_3
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DOI: https://doi.org/10.1007/978-3-030-63643-2_3
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