General interface for adding and/or updating optimization constraints.
This is the main function for adding and/or updating constraints to the portfolio.spec object.
add.constraint(portfolio, type, enabled = TRUE, message = FALSE, ..., indexnum = NULL)
portfolio |
an object of class 'portfolio' to add the constraint to, specifying the constraints for the optimization, see |
type |
character type of the constraint to add or update, currently 'weight_sum' (also 'leverage' or 'weight'), 'box', 'group', 'turnover', 'diversification', 'position_limit', 'return', 'factor_exposure', or 'leverage_exposure' |
enabled |
TRUE/FALSE. The default is enabled=TRUE. |
message |
TRUE/FALSE. The default is message=FALSE. Display messages if TRUE. |
... |
any other passthru parameters to specify constraints |
indexnum |
if you are updating a specific constraint, the index number in the $constraints list to update |
The following constraint types may be specified:
weight_sum, weight, leverage Specify constraint on the sum of the weights, see weight_sum_constraint
full_investment Special case to set min_sum=1 and max_sum=1 of weight sum constraints
dollar_neutral, active Special case to set min_sum=0 and max_sum=0 of weight sum constraints
box box constraints for the individual asset weights, see box_constraint
long_only Special case to set min=0 and max=1 of box constraints
group specify the sum of weights within groups and the number of assets with non-zero weights in groups, see group_constraint
turnover Specify a constraint for target turnover. Turnover is calculated from a set of initial weights, see turnover_constraint
diversification target diversification of a set of weights, see diversification_constraint
position_limit Specify the number of non-zero, long, and/or short positions, see position_limit_constraint
return Specify the target mean return, see return_constraint
factor_exposure Specify risk factor exposures, see factor_exposure_constraint
leverage_exposure Specify a maximum leverage exposure, see leverage_exposure_constraint
Ross Bennett
data(edhec)
returns <- edhec[, 1:4]
fund.names <- colnames(returns)
pspec <- portfolio.spec(assets=fund.names)
# Add the full investment constraint that specifies the weights must sum to 1.
pspec <- add.constraint(portfolio=pspec, type="weight_sum", min_sum=1, max_sum=1)
# The full investment constraint can also be specified with type="full_investment"
pspec <- add.constraint(portfolio=pspec, type="full_investment")
# Another common constraint is that portfolio weights sum to 0.
pspec <- add.constraint(portfolio=pspec, type="weight_sum", min_sum=0, max_sum=0)
pspec <- add.constraint(portfolio=pspec, type="dollar_neutral")
pspec <- add.constraint(portfolio=pspec, type="active")
# Add box constraints
pspec <- add.constraint(portfolio=pspec, type="box", min=0.05, max=0.4)
# min and max can also be specified per asset
pspec <- add.constraint(portfolio=pspec,
type="box",
min=c(0.05, 0, 0.08, 0.1),
max=c(0.4, 0.3, 0.7, 0.55))
# A special case of box constraints is long only where min=0 and max=1
# The default action is long only if min and max are not specified
pspec <- add.constraint(portfolio=pspec, type="box")
pspec <- add.constraint(portfolio=pspec, type="long_only")
# Add group constraints
pspec <- add.constraint(portfolio=pspec,
type="group",
groups=list(c(1, 2, 1), 4),
group_min=c(0.1, 0.15),
group_max=c(0.85, 0.55),
group_labels=c("GroupA", "GroupB"),
group_pos=c(2, 1))
# Add position limit constraint such that we have a maximum number
# of three assets with non-zero weights.
pspec <- add.constraint(portfolio=pspec, type="position_limit", max_pos=3)
# Add diversification constraint
pspec <- add.constraint(portfolio=pspec, type="diversification", div_target=0.7)
# Add turnover constraint
pspec <- add.constraint(portfolio=pspec, type="turnover", turnover_target=0.2)
# Add target mean return constraint
pspec <- add.constraint(portfolio=pspec, type="return", return_target=0.007)
# Example using the indexnum argument
portf <- portfolio.spec(assets=fund.names)
portf <- add.constraint(portf, type="full_investment")
portf <- add.constraint(portf, type="long_only")
# indexnum corresponds to the index number of the constraint
# The full_investment constraint was the first constraint added and has
# indexnum=1
portf$constraints[[1]]
# View the constraint with indexnum=2
portf$constraints[[2]]
# Update the constraint to relax the sum of weights constraint
portf <- add.constraint(portf, type="weight_sum",
min_sum=0.99, max_sum=1.01,
indexnum=1)
# Update the constraint to modify the box constraint
portf <- add.constraint(portf, type="box",
min=0.1, max=0.8,
indexnum=2)Please choose more modern alternatives, such as Google Chrome or Mozilla Firefox.