[GSoC-PortA] Mean-mETL objective?

[Doug Martin]

-----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, October 04, 2013 12:59 PM
To: gsoc-porta at r-forge.wu-wien.ac.at
Subject: Re: [GSoC-PortA] Mean-mETL objective?

 

If it is an LP problem, I think you can only minimize subject to
constraints.

[Doug] Although I have never check this, it does not sound right.  The inner
product in the LP formulation of ETL supports that formulation of ETL as an
LP, but there should be no problem to adding another piece representing the
inner product of mean return forecasts and portfolio weights (mean portfolio
return estimate).  I will check it out, as I had intended to add this in the
ETL chapter.

 

If it is a QP problem, can't you do the mean/ETL portfolio?

 

That assumes the space is convex, which it will be for Gaussian ETL,

[Doug] But that case is not interesting, does not add value relative to MVO.

 

and may not be for modified Cornish Fisher ETL, but will be most of the
time, at most reasonable confidence levels.

[Doug] For both standard and modified ETL, the problem is in general
non-convex.  I guess you are saying from your experience the problem with
modified ETL usually appears to be convex.  I'm curious about how you
ascertain that?   E.g., because on multiple runs with DeOptim you seldom
find more than one local minimum?  That would certainly be reassuring.

 

 

Brian

 

On 10/04/2013 02:42 PM, Ross Bennett wrote:

> 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.

> 

> 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. 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 

> < <mailto:peter at braverock.com> mailto: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

_______________________________________________

GSoC-PortA mailing list

 <mailto:GSoC-PortA at lists.r-forge.r-project.org>
GSoC-PortA at lists.r-forge.r-project.org

 <http://lists.r-forge.r-project.org/cgi-bin/mailman/listinfo/gsoc-porta>
http://lists.r-forge.r-project.org/cgi-bin/mailman/listinfo/gsoc-porta

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.r-forge.r-project.org/pipermail/gsoc-porta/attachments/20131005/9e666204/attachment-0002.html>