Hierarchical Risk Parity Portfolio

v1.0.0

Compute the asset weights of the hierarchical risk parity portfolio, optionally subject to:

Minimum and maximum weights constraints
Minimum and maximum portfolio exposure constraints

References

Input

{
  "type": "object",
  "required": [
    "assets",
    "assetsCovarianceMatrix"
  ],
  "properties": {
    "assets": {
      "type": "integer",
      "description": "The number of assets"
    },
    "assetsCovarianceMatrix": {
      "type": "array",
      "description": "assetsCovarianceMatrix[i][j] is the covariance between the asset i and the asset j",
      "items": {
        "type": "array",
        "items": {
          "type": "number"
        }
      }
    },
    "clusteringMethod": {
      "type": "string",
      "description": "The hierarchical clustering method to use",
      "enum": [
        "singleLinkage",
        "averageLinkage",
        "completeLinkage",
        "wardLinkage"
      ]
    },
    "clusteringOrdering": {
      "type": "string",
      "description": "The order to impose on the hierarchical clustering tree leaves",
      "enum": [
        "r-hclust",
        "optimal"
      ]
    },
    "constraints": {
      "type": "object",
      "properties": {
        "maximumAssetsWeights": {
          "type": "array",
          "description": "maximumAssetsWeights[i] is the maximum weight of the asset i in the portfolio, in percentage",
          "items": {
            "type": "number"
          }
        },
        "maximumPortfolioExposure": {
          "type": "number",
          "description": "The maximum portfolio exposure; must be higher than or equal to minimumPortfolioExposure"
        },
        "minimumAssetsWeights": {
          "type": "array",
          "description": "minimumAssetsWeights[i] is the minimum weight of the asset i in the portfolio, in percentage",
          "items": {
            "type": "number"
          }
        },
        "minimumPortfolioExposure": {
          "type": "number",
          "description": "The minimum portfolio exposure; must be lower than or equal to maximumPortfolioExposure"
        }
      }
    }
  }
}

Output

{
  "type": "object",
  "required": [
    "assetsWeights"
  ],
  "properties": {
    "assetsWeights": {
      "type": "array",
      "description": "assetsWeights[i] is the weight of the asset i in the portfolio, in percentage",
      "items": {
        "type": "number"
      }
    }
  }
}