[R-SIG-Finance] 130/30 Portfolio Optimization
guy.yollin at rotellacapital.com
Mon Apr 14 20:34:34 CEST 2008
On Feb 5th, David Basterfield gave a webcast on the differential
evolution algorithm (http://www.icsi.berkeley.edu/~storn/code.html) in
which he works through a few 115/15 portfolio optimization examples.
The webcast can be downloaded from the events area of the Insightful
The DE algorithm is quite elegant and has been implemented in the
From: r-sig-finance-bounces at stat.math.ethz.ch
[mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of Shlomo
Sent: Monday, April 14, 2008 11:05 AM
To: r-sig-finance at stat.math.ethz.ch
Subject: [R-SIG-Finance] 130/30 Portfolio Optimization
Does anybody have an idea as to how one would find an optimal 130/30
portfolio using R?
More specifically, for a given return covariance matrix Q, vector of
expected security returns mu, and risk tolerance tau, the problem is
to find the portfolio vector x that minimizes
x' * Q * x - tau * mu' * x
subject to the following constraints:
A * x = b for given constraint matrix A and vector b,
x >= L,
x <= U,
the sum of the positive elements of x is 1.3,
the sum of the negative elements of x is -0.3,
If not for the last two nonlinear constraints, solve.QP in
library(quadprog) would be applicable. Unfortunately, these two
constraints are central to the problem.
I'd appreciate any help.
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