PCDaR: Portfolio optimisation with conditional draw down at risk constraint

Description

This function returns the result of a long-only portfolio optimization whereby the portfolio's (historic) conditional draw down at risk is constrained to an upper limit.

Usage

PCDaR(PriceData, alpha = 0.95, bound = 0.05, softBudget = FALSE, ...)

Arguments

PriceData

A rectangular array of price data.

alpha

Numeric, the confidence level for which the conditional draw down shall be computed.

bound

Numeric, the upper bound of the conditional draw down.

softBudget

Logical, whether the budget constraint shall be implemented as a soft constraint, i.e. the sum of the weights can be less than one. The default is to use an equality constraint.

...

Arguments are passed down to Rglpk_solve_LP

Value

An object of formal class "PortAdd".

Details

This function implements a long-only portfolio optimisation with a CDaR constraint (see references below). The problem can be stated in the form of a linear program and GLPK is used as solver.

References

Chekhlov, A. and Uryasev, S. and Zabarankin, M., Portfolio Optimization with Drawdown Constraints, Department of Industrial and Systems Engineering, University of Florida, Research Report 2000-5, 2000, Gainesville, FL. Chekhlov, A. and Uryasev, S. and Zabarankin, M., Drawdown Measure in Portfolio Optimization, International Journal of Theoretical and Applied Finance, 2005, 8(1), 13--58.

Examples

Run this code

## Not run: 
# data(StockIndex)
# popt <- PCDaR(PriceData = StockIndex, alpha = 0.95,
#               bound = 0.1, softBudget = TRUE)
# ## End(Not run)

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