Hi Lui, I never worked with such kind of portfolio optimization problem but in Risk management practice it often comes as estimated VCV matrix is not a PD, hence it is not a truly VCV matrix. Root of this problem might be many, most importantly, it is incomplete and inconsistent return values.
In such case, common practice is to disturb this estimated VCV matrix slightly, so that you would get **nearest** VCV matrix which is PD. Here you might be interested in: http://eprints.ma.man.ac.uk/232/01/covered/MIMS_ep2006_70.pdf Therefore I guess, what you need to do is perhaps debug the underlying codes and do some reverse-engineering to modify the underlying matrix to a nearest PD. HTH _____________________________________________________ Arun Kumar Saha, FRM QUANTITATIVE RISK AND HEDGE CONSULTING SPECIALIST Visit me at: http://in.linkedin.com/in/ArunFRM _____________________________________________________ -- View this message in context: http://r.789695.n4.nabble.com/portfolio-optim-and-error-in-solve-QP-matrix-D-not-positive-definite-tp3241430p3241453.html Sent from the Rmetrics mailing list archive at Nabble.com. _______________________________________________ [email protected] mailing list https://stat.ethz.ch/mailman/listinfo/r-sig-finance -- Subscriber-posting only. If you want to post, subscribe first. -- Also note that this is not the r-help list where general R questions should go.
