Estimate Efficient Portfolios and Frontiers

Analyze efficient portfolios and efficient frontiers for portfolio

Objects

 Portfolio Create Portfolio object for mean-variance portfolio optimization and analysis

Functions

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 estimateFrontier Estimate specified number of optimal portfolios on the efficient frontier estimateFrontierByReturn Estimate optimal portfolios with targeted portfolio returns estimateFrontierByRisk Estimate optimal portfolios with targeted portfolio risks estimateFrontierLimits Estimate optimal portfolios at endpoints of efficient frontier plotFrontier Plot efficient frontier
 estimateMaxSharpeRatio Estimate efficient portfolio to maximize Sharpe ratio for Portfolio object estimatePortSharpeRatio Estimate Sharpe ratio of given portfolio weights for Portfolio object estimatePortMoments Estimate moments of portfolio returns for Portfolio object estimatePortReturn Estimate mean of portfolio returns estimatePortRisk Estimate portfolio risk according to risk proxy associated with corresponding object
 setSolver Choose main solver and specify associated solver options for portfolio optimization setSolverMINLP Choose mixed integer nonlinear programming (MINLP) solver for portfolio optimization

Examples and How To

Estimate Efficient Portfolios for Entire Efficient Frontier for Portfolio Object

The most basic way to obtain optimal portfolios is to obtain points over the entire range of the efficient frontier.

Obtaining Endpoints of the Efficient Frontier

Determine the range of returns from minimum to maximum to refine a search for a portfolio with a specific target return.

Obtaining Efficient Portfolios for Target Returns

To obtain efficient portfolios that have targeted portfolio returns, use the estimateFrontierByReturn function.

Obtaining Efficient Portfolios for Target Risks

To obtain efficient portfolios that have targeted portfolio risks, use the estimateFrontierByRisk function.

Efficient Portfolio That Maximizes Sharpe Ratio

Portfolios that maximize the Sharpe ratio are portfolios on the efficient frontier that satisfy several theoretical conditions in finance.

Estimate Efficient Frontiers for Portfolio Object

Given any portfolio, the functions estimatePortReturn, estimatePortRisk, and estimatePortMoments provide estimates for the return and risk.

Plotting the Efficient Frontier for a Portfolio Object

The plotFrontier function creates a plot of the efficient frontier for a given portfolio optimization problem.

Asset Allocation Case Study

This example shows how to set up a basic asset allocation problem that uses mean-variance portfolio optimization with a Portfolio object to estimate efficient portfolios.

Portfolio Optimization Examples

The following sequence of examples highlights features of the Portfolio object in the Financial Toolbox™.

Leverage in Portfolio Optimization with a Risk-Free Asset

This example shows how to use the setBudget function for the Portfolio class to define the limits on the sum(AssetWeight_i) in risky assets.

Mixed-Integer Quadratic Programming Portfolio Optimization: Problem-Based

This example shows how to solve a Mixed-Integer Quadratic Programming (MIQP) portfolio optimization problem using the problem-based approach.

Portfolio Optimization with Semicontinuous and Cardinality Constraints

This example shows how to use a Portfolio object to directly handle semicontinuous and cardinality constraints.

Black-Litterman Portfolio Optimization

This example shows the workflow to implement the Black-Litterman model with the Portfolio class.

Portfolio Optimization Using Factor Models

This example shows two approaches for using a factor model to optimize asset allocation under a mean-variance framework.

Portfolio Optimization Using a Social Performance Measure

This example shows how to use a Portfolio object for portfolio optimization that includes a social performance measure for the percentage of women on a company's board and group constraints.

Diversification of Portfolios

This example shows three techniques of asset diversification in a portfolio.

Concepts

Portfolio Object Workflow

Portfolio object workflow for creating and modeling a mean-variance portfolio.

Choosing and Controlling the Solver for Mean-Variance Portfolio Optimization

The default solver for mean-variance portfolio optimization is lcprog.

When to Use Portfolio Objects Over Optimization Toolbox

The three cases for using Portfolio, PortfolioCVaR, PortfolioMAD object are: always use, preferred use, and use Optimization Toolbox.