[R-SIG-Finance] parma - How to add a constraint to the SOCP solver

[u0055 at wolke7.net]

Dear R-SIGs,

I would like to optimize a long/short portfolio and
apply the constraint: sum( abs( weights )) = 1.
I'm using the parma package and it's SOCP solver.
I have heard via attached mail,
that it's possible to add my above constraint
to the SOCP solver by "the 'leverage' constraint".

Does anybody know the syntax for that,
or is there any R snippet available ?

Thanks in advance,
Uwe


> The vignette, if you were unable to build it from the source, is
> available here:
>
> http://cran.r-project.org/web/packages/parma/vignettes/Portfolio_Optimization_in_parma.pdf
>
> Section 4.4 is clearly marked with heading "SOCP".
>
> As to the question on whether a specific problem can be solved by a
> specific type of solver, the answer is yes. The QP solver will not allow
> you to formulate and solve a problem using the 'leverage' constraint,
> but the SOCP solver will.
>
> -Alexios
>
> On 10/08/2014 16:56, u0055 at wolke7.net wrote:
>> Dear R-SIGs,
>>
>> I would like to optimize a long/short portfolio and
>> apply the constraint: sum(abs(weights)) = 1.
>> How can I do this with parma package ?
>>
>> In the moment I'm using QP solver.
>> Is the solution for my question dependent on the used solver ?
>>
>> Alexios wrote on Jul. 14:
>>> 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.
>>
>> Sorry I don't find "Section 4.4 of the vignette".
>> Is there a good example or documentation available ?
>>
>> Thanks in advance,
>> Uwe