Data
X1
Event 1
Event 2
Event 3
Event 4
Event 5
Event 6
Event 7
Event 8
Event 9
Event 10
Mean
Max
Min
X2
7
8
4
5
6
3
2
5
4
3
4.7
8
2
X3
6
4
8
9
7
10
12
4
7
9
7.6
12
4
X4
8
16
14
-2
13
11
-2
18
12
-5
8.3
18
-5
<Tools-Data Analysis-Covariance>
X1
X2
X3
X1
3.21
X2
-3.52
5.84
X3
6.99
-13.68
61.81
X4
0.04
0.12
-1.64
S Matrix: "Variance-Covariance Matrix"
X1
X2
X3
X1
3.21
-3.52
6.99
X2
-3.52
5.84
-13.68
X3
6.99
-13.68
61.81
X4
0.04
0.12
-1.64
5
6
6
7
6
5
6
6
5
6
5.8
7
5
LP Model
Variables to manipulate
Decision Variables
Objective to Maximize
Expected Value
Risk component
Avalable Funds
Solution
RAP
Buy Stock1 (X1)
Buy Stock2 (X2)
Buy Stock3 (X3)
Buy Stock4 (X4)
Obj
Mean
Variance
Standard Deviate
Shadow Price
0.000
X1
4.7
22
0.00100
0.000
7.355
9.977
0.000
134.245
138.705
4460.478
66.787
X4
Matrix Multiplication
X'S
43.8470931
0.36
X4
0.04
0.12
-1.64
0.36
0
7.35509438
9.97668459
0
X'SX
4460.47805
7.355
X2
9.977
X3
0.000
X4
7.6
8.3
5.8
30
28
26
X' Matrix
Sum
RHS Limit
134.245
138.705
4.460
500
500
E-V Exmaple
Step 1: Get Data
X1
Event 1
Event 2
Event 3
Event 4
Event 5
Event 6
Event 7
Event 8
Event 9
Event 10
X2
7
8
4
5
6
3
2
5
4
3
X3
6
4
8
9
7
10
12
4
7
9
X4
8
16
14
-2
13
11
-2
18
12
-5
5
6
6
7
6
5
6
6
5
6
We have 10 observations of
stock return for 4 stocks
4 Stocks
Step 2: Calculate Statistics
Mean
Max
Min
4.7
8
2
7.6
12
4
8.3
18
-5
5.8 =AVERAGE(E5:E14)
7 =MAX(E5:E14)
5 =MIN(E5:E14)
4.405
X1
8.188
X2
1.753
X3
4.168
X4
4.7
7.6
8.3
5.8
22
30
28
26
Sum
116.805
121.656
4.851
500
RAP
0.05
(1X4 Matrix)
-2.259473 8.8280077 20.306058 -0.215722 {=MMULT(G45:J45,B36:E39)}
(4X1 Matrix)
4.4050231
8.1875743
1.7530661
4.1683235
X'SX
{=TRANSPOSE(G45:J45)}
(1X1 Matrkx)
97.025603
Step 8: Summarize and save the solution and Try another RAP
RAP
Buy Stock1 (X1)
Buy Stock2 (X2)
Buy Stock3 (X3)
Buy Stock4 (X4)
Obj
Mean
Variance
Standard Deviation
Shadow Price
0.05000
4.405
8.188
1.753
4.168
116.805
121.656
97.026
9.850
0.224
=K51
=G45
=H45
=I45
=J45
=K47
=K48
=B66
=G79^0.5
='Sensitivity Report 1'!E17
{=MMULT(B57:E57,B60:B63)}
<Tools-Solver>
e have 10 observations of
ock return for 4 stocks
ta Analysis-Covariance>
X' Matrix
RHS Limit
=L48-L49
=$H$45*H48+$I$45*I48+$J$45*J48+$K$45*K48
=L51*B52
500
Change RAP
Change RAP
G45:J45,B36:E39)}
Use "Array function"
1) Click and drag area
2) Type command (=mmult( , )
3) Ctrl - Shift - Enter
OSE(G45:J45)}
B57:E57,B60:B63)}
0.05000
4.405
8.188
1.753
4.168
116.805
121.656
97.026
9.850
0.224
Adjustable Cells
Cell
$G$45
$H$45
$I$45
$J$45
Name
Variables to manipulate
Variables to manipulate
Variables to manipulate
Variables to manipulate
Final
Value
4.405
8.188
1.753
4.168
Reduced
Gradient
0.000
0.000
0.000
0.000
Constraints
Cell
Name
$K$50 Avalable Funds Sum
Final Lagrange
Value Multiplier
500 0.223906565
Adjustable Cells
Cell
$G$45
$H$45
$I$45
$J$45
Final
Name
Value
Variables to manipulate 0.000
Variables to manipulate 5.324
Variables to manipulate 12.152
Variables to manipulate 0.000
Reduced
Gradient
-1.121
0.000
0.000
-0.933
Constraints
Cell
Name
$K$50 Avalable Funds Sum
Final
Lagrange
Value
Multiplier
500 0.260090876
Adjustable Cells
Cell
$G$45
$H$45
$I$45
$J$45
Final
Name
Value
Variables to manipulate 0.000
Variables to manipulate 0.000
Variables to manipulate 17.857
Variables to manipulate 0.000
Reduced
Gradient
-1.450
-0.579
0.000
-1.380
Constraints
Cell
Name
$K$50 Avalable Funds Sum
Final
Lagrange
Value
Multiplier
500 0.276718736
Adjustable Cells
Cell
$G$45
$H$45
$I$45
$J$45
Final
Name
Value
Variables to manipulate 0.000
Variables to manipulate 1.263
Variables to manipulate 16.504
Variables to manipulate 0.000
Reduced
Gradient
-1.144
0.000
0.000
-0.949
Constraints
Cell
Name
$K$50 Avalable Funds Sum
Final
Lagrange
Value
Multiplier
500 0.260613237
Adjustable Cells
Cell
$G$45
$H$45
$I$45
$J$45
Final
Name
Value
Variables to manipulate 0.000
Variables to manipulate 0.000
Variables to manipulate 17.857
Variables to manipulate 0.000
Reduced
Gradient
-1.821
-1.293
0.000
-1.907
Constraints
Cell
Name
$K$50 Avalable Funds Sum
Final
Lagrange
Value
Multiplier
500 0.296428578