calc_optimal_risky_asset_allocation {R4GoodPersonalFinances} | R Documentation |
Calculate optimal risky asset allocation
Description
Calculates the optimal allocation to the risky asset using the Merton Share formula.
Usage
calc_optimal_risky_asset_allocation(
risky_asset_return_mean,
risky_asset_return_sd,
safe_asset_return,
risk_aversion
)
Arguments
risky_asset_return_mean |
A numeric. The expected (average) yearly return of the risky asset. |
risky_asset_return_sd |
A numeric. The standard deviation of the yearly returns of the risky asset. |
safe_asset_return |
A numeric. The expected yearly return of the safe asset. |
risk_aversion |
A numeric. The risk aversion coefficient. |
Details
Can be used to calculate the optimal allocation to the risky asset for vectors of inputs.
Value
A numeric.
The optimal allocation to the risky asset.
In case of NaN()
(because of division by zero)
the optimal allocation to the risky asset is set to 0.
See Also
Haghani V., White J. (2023) "The Missing Billionaires: A Guide to Better Financial Decisions." ISBN:978-1-119-74791-8.
Examples
calc_optimal_risky_asset_allocation(
risky_asset_return_mean = 0.05,
risky_asset_return_sd = 0.15,
safe_asset_return = 0.02,
risk_aversion = 2
)
calc_optimal_risky_asset_allocation(
risky_asset_return_mean = c(0.05, 0.06),
risky_asset_return_sd = c(0.15, 0.16),
safe_asset_return = 0.02,
risk_aversion = 2
)
[Package R4GoodPersonalFinances version 1.0.0 Index]