Portfolio distribution functions

distribute (var* Weights, var* Values, int N, int M, var* Caps) : var

distribute (var* Weights, var* Values, int N, int M, var Cap) : var

Calculate portfolio weights for a subset of M assets out of a N-asset portfolio. The M largest positive elements of the Values array are taken; the other elements are ignored. The resulting weights are stored in the Weights array and normalized so that they sum up to 1. A weight limit can be applied either individually (Caps array) per element, or globally (Cap) for all elements. Weights are clipped at the limit, and the remainders are distributed among the other positive weights. The total weight sum can end up less than 1 if the weight limit restriction were otherwise violated.This function is normally used to distribute asset weights in a portfolio dependent on individual parameters such as momentum.

Parameters:

Weights Output array of size N to receive M normalized weights. The other elements are 0.
Values Input array of size N, for instance projected profits, momentums, or Sharpe ratios of portfolio components.
N Number of elements in the Weights, Values, and Caps arrays.
M Max number of resulting nonzero weights, or 0 for distributing all N weights.
Caps Array of weight limits in the 0..1 range, or 0 for no weight limit.
Cap Global limit in the 0..1 range to be applied to all weights, or 0 for no weight limits.

Returns

Sum of weights after applying the limits.
 

assign (int* Items, var* Costs, var* Weights, int N, var Budget) : var

Given current Costs and portfolio Weights of N assets, distribute the given Budget according to asset weights. The Weights array can be generated with the distribute or markowitz functions. Due to the integer amounts, normally not the whole budget can be assigned. The function assigns in several steps as much of the budget as possible, and returns the rest.

Parameters:

Items Output array of size N to receive the weight-equivalent amounts for all assets.
Costs Input array of size N containing the current asset cost, such as price or margin cost.
Weights Input array of size N containing the normalized portfolio weights.The sum must be 1.
N Number of elements of the arrays.
Budget Available capital to distribute, for instance the current account equity.

Returns

Budget remainder that could not be assigned.
 
 

knapsack (int* Items, var* Costs, var* Values, int N, var Budget, var Cap) : var

Given current Costs and expected Values of N assets, calculate the optimal asset amounts that maximize the total value, while keeping the total cost below the given Budget. The function performs an unbounded knapsack optimization. It can be used to optimally distribute small capital among a portfolio of stocks or ETFs. 

Parameters:

Items Output array of size N to receive the optimal amounts for all assets.
Costs Input array of size N containing the current asset cost, such as price or margin cost.
Values Input array of size N containing projected prices or expected profits.
N Number of elements of the arrays.
Budget Available capital to distribute, for instance the current account equity.
Cap Maximum Budget weight per asset in the 0..1 range (f.i. 0.5 = max 50% of Budget), or 0 for no asset limits.

Returns

Total expected value of the portfolio.
 

Remarks

Example:

void main()
{
  var wt[5] = {30,40,70,80,90};
  var val[5] = {40,50,100,110,130};
  int Items[5];
  var Total = knapsack(Items,wt,val,5,500,0); 
  printf("\nItems: %i %i %i %i %i => %.2f",
    Items[0],Items[1],Items[2],Items[3],Items[4],Total);
}

See also:

renorm, OptimalF, markowitz

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