R/portfolio-feasiblePfolio.R

In fPortfolio: Rmetrics - Portfolio Selection and Optimization

# This library is free software; you can redistribute it and/or
# modify it under the terms of the GNU Library General Public
# License as published by the Free Software Foundation; either
# version 2 of the License, or (at your option) any later version.
#
# This library is distributed in the hope that it will be useful,
# but WITHOUT ANY WARRANTY; without even the implied warranty of
# MERCHANTABILITY or FITNESS FOR A PARTICULAR Description. See the
# GNU Library General Public License for more details.
#
# You should have received a copy of the GNU Library General
# Public License along with this library; if not, write to the
# Free Foundation, Inc., 59 Temple Place, Suite 330, Boston,
# MA 02111-1307 USA


################################################################################
# FUNCTION:                DESCRIPTION:
#  feasiblePortfolio        Returns a feasible portfolio
################################################################################


feasiblePortfolio <-
    function(data, spec = portfolioSpec(), constraints = "LongOnly")
{
    # A function implemented Diethelm Wuertz

    # Description:
    #   Computes Risk and Return for a feasible portfolio

    # Arguments:
    #   data - a rectangular timeSeries object of assets
    #   spec - an object of class 'fPFOLIOSPEC'
    #   constraints - a character vector or NULL

    # FUNCTION:

    # Data and Assets Names:
    Data <- portfolioData(data, spec)
    if(inherits(data,"fPFOLIODATA")) data <- getSeries(Data) 
    assetsNames <- getUnits(Data)
    
    # Specification:
    Spec <- spec
    
    # Constraints:
    Constraints <- portfolioConstraints(Data, spec, constraints)

    # Get Weights:
    if(is.null(getWeights(spec))) {
        stop("Missing weights")
    }
    weights <- as.vector(getWeights(spec))
    names(weights) <- assetsNames

    if (inherits(getSeries(Data),"timeSeries")) {
    
        # Compute Returns:
        targetReturn <- c(
            mean = (Data@statistics$mean %*% weights)[[1]],
            mu = (Data@statistics$mu %*% weights)[[1]])
        setTargetReturn(spec) <- targetReturn
    
        # Compute Covariance Risk:
        Cov <- Data@statistics$Cov
        cov <- sqrt((weights %*% Cov %*% weights)[[1]])
    
        # Check Solver:
        # if (any(constraints@stringConstraints == "Short")) {
        #     setSolver(spec) = "solveRshortExact"
        #     warning("Short Constraints Specified: Solver forced to solveRshortExact")
        # }
        
        # Compute Alternative/Robust Covariance Risk:
        if (getType(spec) == "SPS") {
            myCheck <- TRUE
            funSigma <- match.fun(getObjective(spec)[1])
            rcov <- funSigma(as.vector(weights))
        } else {
            Sigma <- Data@statistics$Sigma
            rcov <- sqrt((weights %*% Sigma %*% weights)[[1]])
        }

        # Compute VaR:
        alpha <- getAlpha(spec)
        returns <- getDataPart(getSeries(Data)) %*% weights
        VaR <- quantile(returns, alpha, type = 1)

        # Compute CVaR:
        CVaR <- VaR - 0.5*mean(((VaR-returns) + abs(VaR-returns))) / alpha

        # Compose Risks:
        targetRisk <- c(cov, rcov, -CVaR, -VaR)
        names(targetRisk) <- c("Cov", "Sigma", "CVaR", "VaR")
        alpha <- getAlpha(Spec)
        
    } else if (inherits(getSeries(Data),"logical")) {
       
        # Compute Returns:
        targetReturn <- c(
            mean = (Data@statistics$mean %*% weights)[[1]],
            mu = NA)
        setTargetReturn(spec) <- targetReturn
        
        # Compute Covariance Risk:
        Cov <- Data@statistics$Cov
        cov <- sqrt((weights %*% Cov %*% weights)[[1]])
        
        # Compose Risks:
        targetRisk <- c(cov, NA, NA, NA)
        names(targetRisk) <- c("Cov", "Sigma", "CVaR", "VaR")
        alpha <- NA
    
    }
        
    # Compute Risk Budgets:
    covRiskBudgets <- (weights * Cov %*% weights)[, 1] / cov^2
    names(covRiskBudgets) <- assetsNames
    
      
    # Compose Portfolio:
    Portfolio <- new("fPFOLIOVAL",
        portfolio = list(
            weights = weights,
            covRiskBudgets = covRiskBudgets,
            targetReturn = targetReturn,
            targetRisk = targetRisk,
            targetAlpha = alpha,
            status = getStatus(spec)))
    
    # Return Value:
    new("fPORTFOLIO",
        call = match.call(),
        data = Data,
        spec = Spec,
        constraints = Constraints,
        portfolio = Portfolio,
        title = "Feasible Portfolio",
        description = description() )
}


################################################################################