PERC {FRAPO} | R Documentation |
This function solves for equal risk contributed portfolio weights.
PERC(Sigma, par = NULL, percentage = TRUE, optctrl = ctrl(), ...)
Sigma |
Matrix, the variance-covariance matrix of asset returns |
par |
Vector, the initial values of the weights. |
percentage |
Logical, whether the weights shall be returned as decimals or percentages (default). |
optctrl |
Object of class |
... |
Ellipsis argument is passed down to |
The objective function is the standard deviation of the marginal risk contributions, which is minimal, i.e. zero, if all contributions are equal. The weights are rescaled to sum to unity.
An object of formal class "PortSol"
.
The optimisation is conducted by calling nlminb()
. Hereby, the
arguments lower = 0
and upper = 1
have been specified.
Bernhard Pfaff
Maillard, S. and Roncalli, T. and Teiletche, J.: The Properties of Equally Weighted Risk Contribution Portfolios, Journal of Portfolio Management, Vol. 36, No. 4, Summer 2010, 60–70.
"PortSol"
data(MultiAsset)
Rets <- returnseries(MultiAsset, method = "discrete", trim = TRUE,
percentage = TRUE)
V <- cov(Rets)
ERC <- PERC(V)
ERC
w <- Weights(ERC)
w * V