Risk budgets in PerformanceAnalytics and PortfolioAnalytics  
  Description  
  Risk budgets are a central tool to estimate and manage the portfolio risk allocation. They decompose total portfolio risk into the risk contribution of each position. 

In Boudt, Croux and Peterson (Journal of Risk, 2008), Peterson and Boudt (Risk, 2008) and Boudt, Carl and Peterson (2011) we developed methodology for the estimation of value-at-risk and conditional value-at-risk budgets for non-normal data using Cornish-Fisher expansions and proposed portfolio allocation strategies based on the estimated risk budgets. 

We made open source code available for the estimation of risk budgets and risk budget optimized portfolios in the R packages PerformanceAnalytics and PortfolioAnalytics. Links to these software packages can be found below.

  
  Estimation of risk budgets in PerformanceAnalytics  
  Download PerformanceAnalytics from http://cran.r-project.org/web/packages/PerformanceAnalytics/index.html  
  Risk budget optimized portfolios in PortfolioAnalytics  
  Recent documented Windows32 version of the package:  PortfolioAnalytics_0.6.zip

The latest version of the package and Versions for other operating systems can be found on http://r-forge.r-project.org/R/?group_id=579 

Or to install this package directly within R type: install.packages("PortfolioAnalytics", repos="http://R-Forge.R-project.org")

Additional documentation on how to obtain risk budget optimized  portfolios in PortfolioAnalytics:

  • Vignette Portfolio Optimization with CVaR budgets in Portfolio Analytics
  • General tutorial on PortfolioAnalytics slides
  
  Papers  
 
  1. Boudt K., Peterson B. and Croux C. 2008.  Estimation and decomposition of downside risk for portfolios with non-normal returns.  Journal of Risk 11(2), 79-103.  pdf   
  2. Peterson B. and Boudt K. Component VaR for a non-normal world. Risk,  November 2008.  Reprint in Asia Risk. pdf
  3. Boudt K., Carl P. and Peterson B. 2011. Asset allocation with Conditional Value-at-Risk Budgets. Work in progess pdf
  4. Ardia, D., Boudt, K., Carl, P., Mullen, K. and Peterson, B. 2011. Differential evolution (DEoptim) for non-convex portfolio optimization. R Journal 3, 27-34. pdf   
  5. Ardia, D., Boudt, K., Mullen, K. and Peterson, B. 2011. Large scale portfolio optimization with DEoptim. pdf   
  
  Contact the authors