[Returnanalytics-commits] r3248 - pkg/PortfolioAnalytics/sandbox

[noreply at r-forge.r-project.org]

Author: rossbennett34
Date: 2013-11-08 16:08:47 +0100 (Fri, 08 Nov 2013)
New Revision: 3248

Added:
   pkg/PortfolioAnalytics/sandbox/leverage_example.R
Log:
Examples demonstrating the differences of specifying a leverage constraint using max_sum compared to leverage_exposure.

Added: pkg/PortfolioAnalytics/sandbox/leverage_example.R
===================================================================
--- pkg/PortfolioAnalytics/sandbox/leverage_example.R	                        (rev 0)
+++ pkg/PortfolioAnalytics/sandbox/leverage_example.R	2013-11-08 15:08:47 UTC (rev 3248)
@@ -0,0 +1,77 @@
+
+# Examples demonstrating the difference of specifying a leverage constraint 
+# using max_sum compared to leverage_exposure.
+
+library(PortfolioAnalytics)
+
+data(edhec)
+R <- edhec
+funds <- colnames(R)
+
+# Set up an initial portfolio object with basic constraints
+init.portf <- portfolio.spec(assets=funds)
+
+# Add an objective to maximize mean return per unit expected shortfall
+init.portf <- add.objective(portfolio=init.portf, type="return", name="mean")
+
+# dollar neutral portfolio
+dollar.neutral.portf <- init.portf
+dollar.neutral.portf <- add.constraint(portfolio=dollar.neutral.portf, 
+                                       type="weight_sum", 
+                                       min_sum=-0.01, max_sum=0.01)
+dollar.neutral.portf <- add.constraint(portfolio=dollar.neutral.portf, 
+                                       type="box", min=-0.5, max=0.5)
+
+# Here is a dollar neutral portfolio with no constraint on leverage
+opt1 <- optimize.portfolio(R=R, portfolio=dollar.neutral.portf, 
+                           optimize_method="DEoptim", search_size=2000, 
+                           trace=TRUE)
+sum(opt1$weights)
+
+# Total portfolio leverage is actually greater than 4
+sum(abs(opt1$weights))
+
+# now add the leverage exposure constraint for 2:1 leverage
+dollar.neutral.portf <- add.constraint(portfolio=dollar.neutral.portf, 
+                                       type="leverage_exposure", leverage=2)
+# Run optimization
+opt2 <- optimize.portfolio(R=R, portfolio=dollar.neutral.portf, 
+                           optimize_method="DEoptim",
+                           search_size=2000)
+sum(opt2$weights)
+sum(abs(opt2$weights))
+
+# Leveraged portfolio
+leveraged.portf <- init.portf
+
+# Add a "leverage" constraint using max_sum
+leveraged.portf <- add.constraint(portfolio=leveraged.portf, 
+                                  type="leverage", 
+                                  min_sum=1.29, max_sum=1.31)
+leveraged.portf <- add.constraint(portfolio=leveraged.portf, 
+                                  type="box", min=-0.3, max=0.6)
+
+opt3 <- optimize.portfolio(R=R, portfolio=leveraged.portf, 
+                           optimize_method="DEoptim",
+                           search_size=2000)
+sum(opt3$weights)
+
+# total portfolio leverage is approximately 3.9
+sum(abs(opt3$weights))
+
+# add a leverage exposure constraint
+leveraged.portf <- add.constraint(portfolio=leveraged.portf, 
+                                  type="leverage_exposure", leverage=1.5)
+
+# change min_sum and max_sum such that the weights sum to 1
+leveraged.portf$constraints[[1]]$min_sum <- 0.99
+leveraged.portf$constraints[[1]]$max_sum <- 1.01
+
+# Run optimization
+opt4 <- optimize.portfolio(R=R, portfolio=leveraged.portf, 
+                           optimize_method="DEoptim",
+                           search_size=2000)
+sum(opt4$weights)
+# total portfolio leverage is less than 1.5
+sum(abs(opt4$weights))
+