In the function estimate_SR_given_weights() for static optimisation of the best set of instruments, there are 3 variables wt, mu, cm used to calculate the portfolio SR with neg_SR().
The formula used to calculate the variance requires the weight and covariance. However, the code seems to use weight (wt) and correlation (cm), instead of covariance.
In the function
estimate_SR_given_weights()for static optimisation of the best set of instruments, there are 3 variableswt, mu, cmused to calculate the portfolio SR withneg_SR().The formula used to calculate the variance requires the weight and covariance. However, the code seems to use weight (
wt) and correlation (cm), instead of covariance.