New answers tagged optimization
0
This is a multiobjective problem and can be solved by building a cloud of portfolios with no constraints on either covariance or correlation and constraints on the return and constraints on either the covariance or correlation (whichever you didn't pick as being unconstrained).
Then, find the efficient (Pareto) frontier of this cloud to find the portfolio ...
4
This might be a surprise to you, you can evaluate the option using Black Scholes.
The key concept is change your numéraire from dollar to the asset associated with $V$. The $V$ in your payout $\max(U_t-V_t,0)$ will effectively get replaced by a constant, the par forward of asset $V$ at maturity $t$.
Since $U_t$ and $V_t$ are independent, you can ...
2
You can find the full R source code for that at the site of Systematic Investor.
For example have a look at this post about Maximum Sharpe Portfolios. There you see that he created the helper function portfolio.allocation.helper for the following optimization methods:
EW=equal.weight.portfolio,
RP=risk.parity.portfolio,
MV=min.var.portfolio,
...
2
For the record, the formula for maximum diversification portfolio can be found in this paper.
As you can see from the quadprog documentation, it minimizes problems of the following form:
$$ \min - d'b + \tfrac12 b' D b ~ \text{with} ~ A' b \geq b_0 $$
So clearly, it's not good for your formula.
You can consider optim or one of its extensions for your ...
Top 50 recent answers are included
