Hello everyone,
I would like assistance with updating a snippet I have written to do a
recursive out-of-sample portfolio optimization.
The trouble I am having is with the fact that the return on the riskless asset
is time varying and so is different in each period.
This is what I have written so far but it does not work;
for (i in 1:648) optimized_port= rollapply(asset_forecast, width=1,
function(x) portfolio.optim(data = as.data.frame(x),
riskless=TRUE, shorts=TRUE, rf= cash_forecast[i,])),
by.column = FALSE, by=1, align="right")
-cash_forecast is a 648x1 matrix having forecasted risk-free returns
-asset_forecast is a 648x7 matrix holding 7 forecasted asset class returns
Can someone point out how to incorporate the changing riskfree in this model.
Many thanks,
Darius
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