[GSoC-PortA] Mean-mETL objective?

[Doug Martin]

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: Friday, October 04, 2013 12:43 PM
To: PortfolioAnalytics
Subject: Re: [GSoC-PortA] Mean-mETL objective?

 

Peter,

 

Unfortunately, with ROI we are only able to minimize ETL with ETL as an
objective. If you have mean and ETL as an objective using ROI, unless there
is a target in the mean return objective, we just minimize ETL. If you have
both mean and ETL as objectives, you could add a target to the mean
objective and this will minimize ETL subject to the target return. 

[Doug] That is unfortunate.

 

We can do the following with ETL as an objective using ROI:

 - Minimize ETL subject to leverage, box, group, exposure, position limit,
and target return.

 

Multipliers are ignored with ROI since the problems are formulated into an
LP/QP problem.

[Doug] Ditto on my comment above.  There is no problem to use solve.QP
directly in the quadratic utility (QU) formulation of the problem (as well
as the MinVar formulation). Should be the same for Rglpk.  So we are
inheriting a limitation of ROI not of the solvers themselves.

 

I'll take a look at the documentation in optimize.portfolio and make sure
this is clear.

 

I hope that helps clear it up.

 

Ross

 

On Fri, Oct 4, 2013 at 11:49 AM, Peter Carl <peter at braverock.com> wrote:

Hey Ross,

I can't seem to get the Mean-mETL objective to select anything other than
the Min mETL portfolio using ROI.  It looks like there should be good
convexity, but I think there's a substantial imbalance between the size of
the monthly mean return and the loss indicated by the ETL.  I've tried
modifying the multiplier on the mean, but it doesn't seem to have an
effect.

Any thoughts?

pcc
--
Peter Carl
http://www.braverock.com/peter



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