NMOF (version 1.2-2)

divRatio: Diversification Ratio

Description

Compute the diversification ratio of a portfolio.

Usage

divRatio(w, var)

Arguments

w

numeric: a vector of weights

var

numeric matrix: the variance--covariance matrix

Value

a numeric vector of length one

Details

The function provides an efficient implemenation of the diversification ratio that is suitable for optimisation.

References

Yves Choueifaty and Yves Coignard (2008) Toward Maximum Diversification. Journal of Portfolio Management 35(1), 40--51.

See Also

pm, drawdown

Examples

# NOT RUN {
na  <- 10     ## number of assets
rho <- 0.5    ## correlation
v_min <- 0.2  ## minimum vol
v_max <- 0.4  ## maximum vol

## set up a covariance matrix S
C <- array(rho, dim = c(na,na))
diag(C) <- 1
vols <- seq(v_min, v_max, length.out = na)
S <- outer(vols, vols) * C

w <- rep(1/na, na)  ## weights
divRatio(w, S)

# }