[R-SIG-Finance] [R] portfolio optimization problem - use R

markleeds at verizon.net markleeds at verizon.net
Mon Jul 21 19:22:24 CEST 2008

  Hi: Patrick Burns POP software solves the problem below. I don't think 
quadprog does because of the transaction cost term but you can check out 
quadprog to confirm. I'm ccing sig-finance because someone over there 
may say/know more ?

On Mon, Jul 21, 2008 at 10:56 AM, fzp2008 wrote:

> How to use R to solve the optimisaton problem
> Minimize:
> ½*w^T*omega*w+mu^T*w+c^T(w-w0) for w>w0 long position
> ½*w^T*omega*w+mu^T*w-c^T(w-w0) for w<w0 short position
> W: is the update weight of portfolio
> Wo is the initial weight of portfolio
> Omega is the variance covariance matrix
> mu is the vector of return rate of stocks in the portfolio
> C is the vector coefficient of transaction cost
>  Is it a quandratic programming problem? Then how to write the 
> objective
> function? Or any other method to solve this?
> -- 
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