[R-SIG-Finance] Is there a general solution (package) for a portfolio optimization ?

[alexios ghalanos]

It is indeed an optimizer constraint on the target portfolio return. As
the documentation explains, the "minrisk" portfolio minimizes risk
subject to a target return. This can either be:
1. 'hard' target (equality)
(minimize risk s.t. portfolio return == target).
2. 'soft' target (inequality)
(minimize risk s.t. portfolio return >= target).

As to the budget constraint, the SOCP solver now allows to include a
sum(abs(weights)) constraint for long-short optimization (when using a
covariance matrix) without having to do any special tricks (as for
instance discussed here:
https://stat.ethz.ch/pipermail/r-sig-finance/2013q4/011972.html).
This is documented in Section 4.4 of the vignette.

-Alexios

On 14/07/2014 12:14, Michael Weylandt wrote:
> 
>> On Jul 14, 2014, at 6:38, u0055 at wolke7.net wrote:
>>
>> Dear R-SIGs,
>>
>> Is there anybody out there working with parma ?
>> It's a great package.
>> I can use parts of it,
>> but don't understand everything.
>>
>> Does anybody know the function of parameter "targetType"
>> in method "parmaspec()" ?
>> The documentation says,
>> it's Whether the target should be a hard equality or inequality.
>> What does that mean ?
> 
> It sounds like it defines the form of an optimizer constraint. E.g., if you weren't allowed to lever a portfolio, you could put \sum w_i either =1 or <=1, depending on whether you are willing to hold cash. The former would be a 'hard equality'; the latter an inequality constraint. 
> 
> This is just speculation based on the description you gave. Check the package docs and source to confirm. 
> 
> Michael
> 
> 
>> Are there good resources about that theme in the internet ?
>>
>> Thanks in advance,
>> Uwe
>>
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