[GSoC-PortA] Quick question on multipliers and constrained_objective()

[Ross Bennett]

Professor Martin and others,

I just added a testing script to match your examples in your 1. theory
review weights constrained mvo v5.pdf slides (attached). See committed
revision 2402 with sandbox/testing_ROI_Martin.R. Currently, the user just
chooses optimize_method="ROI" and optimize.portfolio() takes care of
choosing the ROI plugin for solve.QP or Rglpk_solve_LP based on the
objectives specified.

If "var" is specified as the only objective, then the plug-in selected is
quadprog for solve.QP to minimize variance.

If "var" and "mean" are specified as objectives, then the plug-in selected
is quadprog for solve.QP to maximize quadratic utility.

If "mean" is specified as the only objective, then the plug-in selected is
glpk for Rglpk_solve_LP to maximize return.

If "CVaR" is specified as the only objective, then the plug-in selected is
glpk for Rglpk_solve_LP to minimize sample CVaR.

This is nice for the user because they don't need to know when to use
quadprog and vice versa for glpk.

It appears that the reference manual may be out of date. I could easily
make a vignette with several examples about the functionality that
optimize_method="ROI" offers.  I'd prefer to do this after we are all
satisfied how to set the portfolio object with constraints and objectives.

Regards,
Ross Bennett



On Fri, Jun 21, 2013 at 11:52 PM, Doug Martin <martinrd at comcast.net> wrote:

> Brian and Ross (and anyone else who wishes to comment),****
>
> ** **
>
> Thanks for the late evening response.   Good to allow both conventions wrt
> the sign of risk.  Will check the leading portfolio and risk products for
> most frequent choice, and then we should go to with the majority.  My
> priors are that the plus sign will win.****
>
> ** **
>
> Much more importantly:  I just started browsing the PortfolioAnalytics
> help files manual, slowly starting to refresh my memory of what little I
> understood last summer.  Please see the attached version of August 26 (not
> the latest I know, but almost the last if not the last the Hezky edited)),
> where I have added a small number of comments here and there.  See in
> particular my comments on optimize.portfolio.  It would be very helpful if
> the unfinished business of making ROI invisible to the user is taken care
> of, and soon we just have solve.QP and Rglpk_solve_LP as optimizer choice
> arguments.  Even before getting all the constraint object changes, because
> then I could check running my solve.QP and Rglpk_solve_LP based examples
> (Ross you are quite familiar with these) run via optimize.portfolio and box
> constraints.  Then come back to group constraints when they are implemented.
> ****
>
> ** **
>
> Will keep browsing the manual, and try to understand what is going on.
> Brian, I don’t know if you (and Ross) can manage, but examples at the end
> of each help file would be truly helpful (no pun intended).****
>
> ** **
>
> Thanks,****
>
> Doug****
>
> ** **
>
> P.S. Brian, I hope you didn’t hear my phone call at 11:15 or so – I
> thought you were still live on email and then realized that almost 30
> minutes had passed and you had probably crashed. ****
>
> ** **
>
> ** **
>
> ** **
>
> -----Original Message-----
> From: gsoc-porta-bounces at lists.r-forge.r-project.org [mailto:
> gsoc-porta-bounces at lists.r-forge.r-project.org] On Behalf Of Brian G.
> Peterson
> Sent: Friday, June 21, 2013 8:55 PM
> To: gsoc-porta at r-forge.wu-wien.ac.at
> Subject: Re: [GSoC-PortA] Quick question on multipliers and
> constrained_objective()
>
> ** **
>
> On 06/21/2013 10:44 PM, Doug Martin wrote:****
>
> > Small comment:  a lot (if not most) literature on risk takes risk as a *
> ***
>
> > positive number, so puts a minus sign on the VaR quantile, etc.  I ****
>
> > previously noticed that PerformanceAnalytics takes risk as negative, ***
> *
>
> > had the thought to change that.****
>
> ** **
>
> PerformanceAnalytics allows it either way, user's choice.****
>
> ** **
>
> Risk is risk of *loss*.  Period.****
>
> ** **
>
> Now, the math is sometimes/often easier with a positive number, I admit,
> but it's typical for risk reports on real portfolios to describe those
> risks as negative numbers.****
>
> ** **
>
> So we allow either.****
>
> ** **
>
> ** **
>
> Cheers,****
>
> ** **
>
> Brian****
>
> ** **
>
> ** **
>
> --****
>
> Brian G. Peterson****
>
> http://braverock.com/brian/****
>
> Ph: 773-459-4973****
>
> IM: bgpbraverock****
>
> _______________________________________________****
>
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>
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