[GSoC-PortA] Question on quadratic constraint specification

[Ross Bennett]

See comments below

On Mon, Jun 24, 2013 at 10:27 AM, Doug Martin <martinrd at comcast.net> wrote:

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> *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 *Ross
> Bennett
> *Sent:* Monday, June 24, 2013 7:02 AM
> *To:* PortfolioAnalytics
> *Subject:* [GSoC-PortA] Question on quadratic constraint specification****
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> Hi All,****
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> I have a quick question on quadratic constraint specification. One of the
> bullet points under constraints is "provide quadratic constraint
> specification". I did some digging for the ROI solvers and found that
> quadprog and glpk only handle linear constraints. The ROI plugin for cplex
> can handle a quadratic constraint, but this is a commercial product so I am
> not sure if we want to go down that road and add support for the cplex
> plugin for optimize_method="ROI". Are there workarounds to handle quadratic
> constraints in quadprog or glpk?****
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> *[Doug] I have thought very about the desirability of a chapter on cplex
> in view of the extensive use of the product.  But there is so much else to
> do that this probably won’t happen this go around*
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[Ross] It looks like the IBM CPLEX suite is free for academic use. I might
be able to work on this in the fall after GSOC is complete.

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> Is the intent of providing quadratic constraint specification to allow the
> user to specify or define any function?****
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> *[Doug] A generic quadratic constraint capability would be ideal.  But
> just adding the two you list below would be a good first step.  With regard
> to the second below, I note that Jorion showed that adding an absolute
> volatility risk constraint to TEV portfolios improves their performance.*
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[Ross] Sounds good, I'll work on adding constraint types for
diversification and volatility.

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> Or should we limit it to pre-defined constraint types and functions that I
> can add?****
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> A couple use cases for a quadratic constraint that I thought of are:****
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> - Diversification (Allows the user to specify a diversification limit as a
> constraint).****
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> - Volatility (Allows the user to specify a target volatility (or min or
> max) as a constraint. (e.g. see Peter Carl's email with a portfolio
> specific limit to target volatility of > 10%)****
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> - Other use cases for quadratic constraints?****
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> I can add constraint functions for diversification, volatility, etc. and
> then this could be implemented in constrained_objective or with the mapping
> function that I will work on in the next section.****
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> Thanks,****
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> Ross Bennett****
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