Problem 5 (18 points) Consider the Black-Litterman framework and the following quadratic pro- gram minimize subject to ( ) ( ) ( π) - Ρμ = q Σ (a) (7 points) Describe what the optimization is trying to achieve. What is the model assuming about the strength of the subjective views? (b) (7 points) Find the vector that solves the KKT conditions for the quadratic program. SHOW ALL WORK. (c) (4 points) Other than the ability of incorporating subjective views in the context of MVO, what is the chief benefit of the Black-Litterman approach for using MVO? BRIEFLY discuss.

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