I am trying to code up the optimization problem for Max Diversification Portfolios.
The main problem I am having is properly translating the objective function in to code and port it in to the optimizer in general.
How would one approach this? Can this be solved with R's
The objective function to maximize is the diversification ratio:
d(P) = P'E / sqrt(P'VP)
Eis vector of asset volatilities,
Pis the vector of weights
Vis the covariance matrix.