demo/demo_roi_solvers.R

In PortfolioAnalytics: Portfolio Analysis, Including Numerical Methods for Optimization of Portfolios

#' ---
#' title: "ROI Solvers Demo"
#' author: Ross Bennett
#' date: "7/17/2014"
#' ---

#' This script demonstrates how to solve a constrained portfolio optimization 
#' problem with different solvers available through the ROI 
#' (R Optimization Interface) package. See 
#' http://cran.r-project.org/web/packages/ROI/index.html for more details.

#' Load the packages
library(PortfolioAnalytics)
library(ROI)
library(ROI.plugin.quadprog)
library(ROI.plugin.glpk)
library(ROI.plugin.symphony)

#' Load data
data(edhec)
R <- edhec[, 1:4]
funds <- colnames(R)

#' Set up initial portfolio with basic constraints.
init.portf <- portfolio.spec(assets=funds)
init.portf <- add.constraint(portfolio=init.portf, type="full_investment")
init.portf <- add.constraint(portfolio=init.portf, type="long_only")

#' Add objectives.
maxret.portf <- add.objective(portfolio=init.portf, type="return", name="mean")
mines.portf <- add.objective(portfolio=init.portf, type="risk", name="ES")
minsd.portf <- add.objective(portfolio=init.portf, type="risk", name="StdDev")
qu.portf <- add.objective(portfolio=init.portf, type="risk", name="StdDev", 
                          risk_aversion=0.25)
qu.portf <- add.objective(portfolio=qu.portf, type="return", name="mean")

#' Solve optimization problem to maximize return. Note that 
#' optimize_method="ROI" defaults to using the glpk solver for linear
#' problems.
opt.maxret.roi <- optimize.portfolio(R, maxret.portf, optimize_method="ROI")
opt.maxret.glpk <- optimize.portfolio(R, maxret.portf, optimize_method="glpk")
opt.maxret.symphony <- optimize.portfolio(R, maxret.portf, optimize_method="symphony")
all.equal(extractStats(opt.maxret.roi), extractStats(opt.maxret.glpk))
all.equal(extractStats(opt.maxret.roi), extractStats(opt.maxret.symphony))

#' This fails because an optimization problem with a linear objective cannot
#' be solved with a quadratic programming solver.
# opt.maxret.qp <- optimize.portfolio(R, maxret.portf, optimize_method="quadprog")

#' Solve optimization problem to minimize ES. Note that 
#' optimize_method="ROI" defaults to using the glpk solver for linear 
#' problems.
opt.mines.roi <- optimize.portfolio(R, mines.portf, optimize_method="ROI")
opt.mines.glpk <- optimize.portfolio(R, mines.portf, optimize_method="glpk")
opt.mines.symphony <- optimize.portfolio(R, mines.portf, optimize_method="symphony")
all.equal(extractStats(opt.mines.roi), extractStats(opt.mines.glpk))
all.equal(extractStats(opt.mines.roi), extractStats(opt.mines.symphony))

#' Solve optimization problem to minimize standard deviation. Note that 
#' optimize_method="ROI" defaults to using the quadprog solver for quadratic 
#' problems.
opt.minsd.roi <- optimize.portfolio(R, minsd.portf, optimize_method="ROI")
opt.minsd.qp <- optimize.portfolio(R, minsd.portf, optimize_method="quadprog")
all.equal(extractStats(opt.minsd.roi), extractStats(opt.minsd.qp))

#' This fails because an optimization problem with a quadratic objective cannot
#' be solved with a linear programming solver.
# opt.minsd.glpk <- optimize.portfolio(R, minsd.portf, optimize_method="glpk")

#' Solve optimization problem to maximize quadratic utility. Note that 
#' optimize_method="ROI" defaults to using the quadprog solver for quadratic 
#' problems.
opt.qu.roi <- optimize.portfolio(R, qu.portf, optimize_method="ROI")
opt.qu.qp <- optimize.portfolio(R, qu.portf, optimize_method="quadprog")
all.equal(extractStats(opt.qu.roi), extractStats(opt.qu.qp))