CODEWITHSUNDEEP
r
vn2266a
vn2266a

Reputation: 11

R portfolio analytics (optimize.portfolio.rebalancing function with random optimizer does not work)

I got an error when running optimize.portfolio.rebalancing, with optimize_method="random". The error is:

"Leverage constraint min_sum and max_sum are restrictive, consider relaxing. e.g. 'full_investment' constraint should be min_sum=0.99 and max_sum=1.01".

I tried to modify the codes with the following:

port_spec <- portfolio.spec(assets=colnames(asset_returns), weight_seq=generatesequence(min=0, max=1, by=0.002))
port_spec$constraints[[1]]$min_sum=0.99
port_spec$constraints[[1]]$max_sum=1.01
port_spec <- add.constraint(portfolio=port_spec, type="box", min=0, max=0.5)

, but the code still couldn't work. Any advice would be grateful!

The original code is the following:

    library(PortfolioAnalytics)

   data(edhec)

    asset_returns <- edhec

    port_spec <- portfolio.spec(assets=colnames(asset_returns))

# Add a full investment constraint such that the weights sum to 1

    port_spec <- add.constraint(portfolio=port_spec, type="full_investment")

# Add a long only constraint such that the weight of an asset is between 0 and 1

    port_spec <- add.constraint(portfolio=port_spec, type="long_only")


# Add an objective to minimize portfolio standard deviation

    port_spec <- add.objective(portfolio=port_spec, type="risk", name="StdDev")

# Add a risk budget objective

    port_spec <- add.objective(portfolio = port_spec, 
                               type = "risk_budget", 
                               name = "StdDev", 
                               min_prisk = 0.01, 
                               max_prisk = 0.4)

# Print the portfolio specification

    print(port_spec)

# Run the optimization

    rp <- 50
    opt_rebal_rb <- optimize.portfolio.rebalancing(R = asset_returns, 
                                                   portfolio = port_spec, 
                                                   optimize_method = "random", rp =rp,
                                                   trace = TRUE,
                                                   rebalance_on = "quarters", 
                                                   training_period = 60,
                                                   rolling_window = 60)
    print(opt_rebal_rb)

# Chart the weights

    chart.Weights(opt_rebal_rb)

# Chart the percentage contribution to risk

    chart.RiskBudget(opt_rebal_rb, match.col = "StdDev", risk.type = "percentage")

# Compute the portfolio returns

    returns_rb <- Return.portfolio(R = asset_returns, weights = extractWeights(opt_rebal_rb))
    colnames(returns_rb) <- "risk_budget"

Upvotes: 1

Views: 856

Answers (1)

unmark1
unmark1

Reputation: 342

I know it is very very late, but it might serve for future reference.

port_spec <- add.constraint( portfolio = port_spec,
                             type = "box",
                             min = 0,
                             max= 1 )

Adding this constraint solved the issue for me.

Upvotes: 1

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