Portfolio Wgts Optimization
To answer your immediate question, one approach is to add a Lagrange multiplier to your function. Another is to rescale the weights before computing the utility (this has the potential to confuse the optimizer, but often works okay). But if you are using mean-variance utility, then you should investigate the 'quadprog' package. If your requirements are more complex and you are willing to spend money, then POP from Burns Statistics is a possibility. Patrick Burns patrick at burns-stat.com +44 (0)20 8525 0696 http://www.burns-stat.com (home of S Poetry and "A Guide for the Unwilling S User")
Manoj wrote:
Greeting,
Apologies for the blank email...I am quite new to optim function
in R. I am trying to do the following:
I am trying to optimize Portfolio wgts subjected to certain
constraints. The constraints are that individual weights can be either
0 or maximum 40% and that the sum of the weights should be 1.
While I know that I can use L-BFGS-B method and specify the
lower & upper bound, How can I specify the constraint that the sum of
the weights should add up to 1?
Thanks in advance for your help.
Cheers
Manoj
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