portcons

Portfolio constraints

Description

As an alternative to portcons, use the Portfolio object (Portfolio) for mean-variance portfolio optimization. This object supports gross or net portfolio returns as the return proxy, the variance of portfolio returns as the risk proxy, and a portfolio set that is any combination of the specified constraints to form a portfolio set. For information on the workflow when using Portfolio objects, see Portfolio Object Workflow.

example

ConSet = portcons(ConstType,consttype_values) generates a matrix of constraints, using linear inequalities, for a portfolio of asset investments. The inequalities are of the type A*Wts' <= b, where Wts is the matrix of weights. The matrix ConSet is defined as ConSet = [A b].

Examples

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Constrain a portfolio of three assets: NumAssets = 3;
PVal = 1; % Scale portfolio value to 1.
AssetMin = 0;
AssetMax = [0.5 0.9 0.8];
GroupA = [1 1 0];
GroupB = [0 0 1];
AtoBmax = 1.5 % Value of assets in Group A at most 1.5 times value
AtoBmax = 1.5000
% in group B.

ConSet = portcons('PortValue', PVal, NumAssets,'AssetLims',...
AssetMin, AssetMax, NumAssets, 'GroupComparison',GroupA, NaN,...
AtoBmax, GroupB)
ConSet = 9×4

1.0000    1.0000    1.0000    1.0000
-1.0000   -1.0000   -1.0000   -1.0000
1.0000         0         0    0.5000
0    1.0000         0    0.9000
0         0    1.0000    0.8000
-1.0000         0         0         0
0   -1.0000         0         0
0         0   -1.0000         0
1.0000    1.0000   -1.5000         0

For instance, one possible solution for portfolio weights that satisfy the constraints is 30% in IBM, 30% in HPQ, and 40% in XOM.

Input Arguments

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Constraint type, specified as a character vector defined as follows:

Constraint Type

Description

Values

'Default'

All allocations are >= 0; no short selling allowed. Combined value of portfolio allocations normalized to 1.

NumAssets (required). Scalar representing number of assets in portfolio.

'PortValue'

Fix total value of portfolio to PVal.

PVal (required). Scalar representing total value of portfolio.

NumAssets (required). Scalar representing number of assets in portfolio. See pcpval.

'AssetLims'

Minimum and maximum allocation per asset.

AssetMin (required). Scalar or vector of length NASSETS, specifying minimum allocation per asset.

AssetMax (required). Scalar or vector of length NASSETS, specifying maximum allocation per asset.

NumAssets (optional). See pcalims.

'GroupLims'

Minimum and maximum allocations to asset group.

Groups (required). NGROUPS-by-NASSETS matrix specifying which assets belong to each group.

GroupMin (required). Scalar or a vector of length NGROUPS, specifying minimum combined allocations in each group.

GroupMax (required). Scalar or a vector of length NGROUPS, specifying maximum combined allocations in each group.

See pcglims.

'GroupComparison'

Group-to-group comparison constraints.

GroupA (required). NGROUPS-by-NASSETS matrix specifying first group in the comparison.

AtoBmin (required). Scalar or vector of length NGROUPS specifying minimum ratios of allocations in GroupA to allocations in GroupB.

AtoBmax (required). Scalar or vector of length NGROUPS specifying maximum ratios of allocations in GroupA to allocations in GroupB.

GroupB (required). NGROUPS-by-NASSETS matrix specifying second group in the comparison.

See pcgcomp.

'Custom'

Custom linear inequality constraints A*PortWts' <= b.

A (required). NCONSTRAINTS-by-NASSETS matrix, specifying weights for each asset in each inequality equation.

b (required). Vector of length NCONSTRAINTS specifying the right-hand sides of the inequalities.

Note

Note

You can specify multiple 'ConstType' arguments as ConSet = portcons('ConstType1',consttype_value1,'ConstType2',consttype_value2,'ConstTypeN',consttype_valueN).

Data Types: char

Output Arguments

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Constraints, returned as a matrix. ConSet is defined as ConSet = [A b]. A is a matrix and b a vector such that A*Wts' <= b sets the value, where Wts is the matrix of weights.

Introduced before R2006a