Portfolio Optimization

WHENWhen implementing mean-variance portfolio optimization

ACTIONVerify covariance matrix passes is_positive_semidefinite check before optimization

CONSEQUENCENon-positive semidefinite covariance matrix causes Cholesky decomposition to fail with LinAlgError, preventing optimizer from running

WHENWhen computing covariance and expected returns

ACTIONVerify expected returns series has the same index as covariance matrix columns

CONSEQUENCEIndex mismatch between expected returns and covariance matrix causes portfolio optimization to fail with dimension error or produces incorrect weights

WHENWhen processing raw price data

ACTIONVerify no NaN values exist in output covariance matrix

CONSEQUENCENaN values in covariance matrix cause portfolio optimization to produce NaN/inf weights or fail entirely