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Convert Daily PnL to Returns
3 messages · Subhrangshu Nandi, Brian G. Peterson
Convert them to a wealth index. Add 1 to your first PnL number, and cumsum. This creates a fake "price series" that can then be turned into a return series for all the other analysis you need to do. if 'PnL' is your data variable: cumsum(PnL+1) Regards, - Brian
Subhrangshu Nandi wrote:
I'm using R to optimize our portfolio. However, I do not have a return series, as required in most of the portfolio optimization packages. I have daily PnLs (regular profit/loss numbers) of several products. In order to be able to use PerformanceAnalytics or RMetrics, how should I about converting them to returns? Also, my objective of optimizing the portfolio is to maximize the return, constrained on some risk parameter like VAR/CVAR/etc and then decide how much to trade each product. Any headstart in solving this problem will be helpful. Thanks a lot, -Nandi
Brian G. Peterson http://braverock.com/brian/ Ph: 773-459-4973 IM: bgpbraverock
Oops, my code line is wrong. Sorry. I wasn't thinking clearly about what you said. You need to add the capital number to the series. if you have $1000, and your PnL series is in $, then you would do cumsum(PnL)+1000 to create your wealth index from which you can calculate returns. if the capital changes, you have to take into account the addition or withdrawal from the capital account in your series. Sorry for the confusion, - Brian
Brian G. Peterson wrote:
Convert them to a wealth index. Add 1 to your first PnL number, and cumsum. This creates a fake "price series" that can then be turned into a return series for all the other analysis you need to do. if 'PnL' is your data variable: cumsum(PnL+1) Regards, - Brian Subhrangshu Nandi wrote:
I'm using R to optimize our portfolio. However, I do not have a return series, as required in most of the portfolio optimization packages. I have daily PnLs (regular profit/loss numbers) of several products. In order to be able to use PerformanceAnalytics or RMetrics, how should I about converting them to returns? Also, my objective of optimizing the portfolio is to maximize the return, constrained on some risk parameter like VAR/CVAR/etc and then decide how much to trade each product. Any headstart in solving this problem will be helpful. Thanks a lot, -Nandi
Brian G. Peterson http://braverock.com/brian/ Ph: 773-459-4973 IM: bgpbraverock