[R-SIG-Finance] Best optimizer for large scale problems

[Enrico Schumann]

On Thu, 06 Jun 2013, Bastian Offermann <bastian2507hk at yahoo.co.uk> writes:

> Hi all,
> I am working on a large scale portfolio optimization problem with up
> to 500 assets. My objective function is simple
>
> w*returns - 1/2 * 1/constant * w * Matrix * w
>
> subject to sum(w) == 1 and w is a vector of weights with 0 <= w[i] <=
> 1 for all i = 1, ..., n.
>
> I have tried quadprog, alabama and DEoptim. What are your experiences
> with those and possibly other options?
> Thanks in advance!
>

You say you "have tried" these packages, so did you encounter any
specific problems?  If yes, you should post some examples that
demonstrate these problems.

quadprog sounds reasonable, but if your covariance matrix is not
full-rank, quadprog's solve.QP will not work.  (Which is actually more
an empirical than a computational problem.  For example, there might be
no unique solution.)  Other methods, such as Differential Evolution, do
not have such a constraint.

Regards,
        Enrico

-- 
Enrico Schumann
Lucerne, Switzerland
http://enricoschumann.net