Skip to content
Fast design of risk parity portfolios
Branch: master
Clone or download
Pull request Compare This branch is 6 commits behind dppalomar:master.
Fetching latest commit…
Cannot retrieve the latest commit at this time.
Permalink
Type Name Latest commit message Commit time
Failed to load latest commit information.
.circleci
R
R_buildignore
inst
man
papers
python
src
tests
vignettes
.Rbuildignore
.compileAttributes.R
.gitattributes
.gitignore
.roxygenize.R
.travis.yml
AUTHORS.md
DESCRIPTION
Dockerfile
LICENSE
Makefile
NAMESPACE
NEWS.md
README.Rmd
README.md
appveyor.yml
azure-pipelines.yml
cran-comments.md
riskParityPortfolio.Rproj

README.md

riskParityPortfolio

CRAN_Status_Badge CRAN Downloads CRAN Downloads Total Rcpp

PyPI version Downloads

codecov Travis-CI-Badge Build status CircleCI Docker Build Status Build Status

riskParityPortfolio provides tools to design risk parity portfolios. In its simplest form, we consider the convex formulation with a unique solution proposed by Spinu (2013) and use a cyclical method inspired by Griveau-Billion (2013). For more general formulations, which are usually nonconvex, we implement the successive convex approximation method proposed by Feng & Palomar (2015).

The latest stable version of riskParityPortfolio is available at https://CRAN.R-project.org/package=riskParityPortfolio.

The latest development version of riskParityPortfolio is available at https://github.com/dppalomar/riskParityPortfolio.

Check out the documentation here: https://mirca.github.io/riskParityPortfolio.

Installation

To install the latest stable version of riskParityPortfolio from CRAN, run the following commands in R:

> install.packages("riskParityPortfolio")

To install the development version of riskParityPortfolio from GitHub, run the following commands in R:

> install.packages("devtools")
> devtools::install_github("dppalomar/riskParityPortfolio")

To get help:

> library(riskParityPortfolio)
> help(package = "riskParityPortfolio")
> package?riskParityPortfolio
> ?riskParityPortfolio

Please cite riskParityPortfolio in publications:

> citation("riskParityPortfolio")

You can also get riskParityPortfolio from Docker as follows:

$ docker pull mirca/riskparityportfolio

Microsoft Windows

On MS Windows environments, make sure to install the most recent version of Rtools.

Python

A Python3 implementation of the vanilla method is available in PYPI and can be installed as follows:

$ pip install riskparityportfolio

Alternatively, the development version can be installed as

$ git clone https://github.com/dppalomar/riskParityPortfolio
$ cd python
$ pip install -e .

Usage of riskParityPortfolio

R

library(riskParityPortfolio)

set.seed(42)
# create covariance matrix
N <- 5
V <- matrix(rnorm(N^2), ncol = N)
Sigma <- cov(V)

# risk parity portfolio
res <- riskParityPortfolio(Sigma)
names(res)
#> [1] "w"                 "risk_contribution"
res$w
#> [1] 0.32715962 0.27110678 0.14480081 0.09766356 0.15926922
res$risk_contribution
#> [1] 0.03857039 0.03857039 0.03857039 0.03857039 0.03857039
c(res$w * (Sigma %*% res$w))
#> [1] 0.03857039 0.03857039 0.03857039 0.03857039 0.03857039

# risk budggeting portfolio
res <- riskParityPortfolio(Sigma, b = c(0.4, 0.4, 0.1, 0.05, 0.05))
res$risk_contribution/sum(res$risk_contribution)
#> [1] 0.40 0.40 0.10 0.05 0.05

Python

import numpy as np
import riskparityportfolio as rpp
np.random.seed(42)
# creates a correlation matrix from time-series of five assets
x = np.random.normal(size=1000).reshape((5, -1))
corr = x @ x.T
# create the desired risk budgeting vector
b = np.ones(len(corr)) / len(corr)
# design the portfolio
w = rpp.design(corr, b)
print(w)
# compute the risk budgeting
#> [0.21075375 0.21402865 0.20205399 0.16994639 0.20321721]
rc = w @ (corr * w)
print(rc / np.sum(rc))
# let's try a different budget
#> [0.2 0.2 0.2 0.2 0.2]
b = np.array([0.01, 0.09, .1, .1, .7])
w = rpp.design(corr, b)
print(w)
#> [0.06178354 0.19655744 0.16217134 0.12808275 0.45140493]
rc = w @ (corr * w)
print(rc / np.sum(rc))
#> [0.01 0.09 0.1  0.1  0.7 ]

Documentation

For more detailed information, please check the vignette.

Citation

If you find this package useful in your research, please consider citing the following works:

Contributing

We welcome all sorts of contributions. Please feel free to open an issue to report a bug or discuss a feature request.

Links

Package: CRAN and GitHub.

README file: CRAN-readme and GitHub-readme.

Vignettes: CRAN-html-vignette, CRAN-pdf-vignette, and R/Finance 2019 slides.

Disclaimer

The information, software, and any additional resources contained in this repository are not intended as, and shall not be understood or construed as, financial advice. Past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The authors of this repository accept no liability whatsoever for any loss or damage you may incur. Any opinions expressed in this repository are from the personal research and experience of the authors and are intended as educational material.

You can’t perform that action at this time.