Binomial Tree

Generating The Efficient Frontier Huang And Litzenbergers Approach

If there are no constraints on individual asset weights, the efficient frontier can also be produced elegantly from algebra. Although some of the more advanced textbooks such as Elton and Gruber, 1995 demonstrate this through the iterative solution of a set of simultaneous equations, there is a better approach. Huang and Litzenberger denoted HL have described how to find two points on the frontier, and then to generate the whole of the frontier from these points by applying a result due to...