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An iterative process of reviewing inputs and constraints such as
turnover, industry bounds and risk exposures to achieve the desired
portfolio weights.

Intermediate

Optimization is the process of selecting portfolio weights to assets based on the maximization of a ratio or return over risk. This is often called MVO for Mean/Variance Optimization which is a key component of Modern Portfoio Theory. In that equation, Mean stands for the forecast return and Variance stands for the forecast variance for the ending portfolio. This optimization incorprates two measure of risk: variance and covariance. The calculatino takes into consideration the benefits of diversification as represented in a covariance matrix.

Synonyms: portfolio optimization, MVO optimization, optimisation

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**Kim: ***At my job I do SEO. Search Engine
Optimization. What do you do again?*

**Guy: ***I do MVO. It's portfolio
optimization. I've heard SEO
is more difficult.*

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Keywords:

optimization

portfolio optimization

MVO optimization

optimal portfolio

portfolio theory

efficient frontier

Sharpe Ratio

risk aversion

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