We have a policy of having our portfolio in at least 10% cash. I think it should be a part of the optimization as cash is riskless (or low risk) and affects the volatility of the portfolio as a whole. How do I set up the input tab to take cash into account?
If all observations have the same price, then it will cause an division by zero (zero return) error. Can you try with some variation such as reinvested interest?
Yeah I got the weighting thing but was confused about what to put in for price data. I used a unit of one and then an amount of 100K (arbitrary) and copied that to the rest of the cells in the column till it matched the time horizon for the other securities. I'm ignoring interest for the moment. When I put that in the spreadsheet threw an error.
You can specify a minimum constraint of 10% for the cash fund in the Input sheet. This will include it as and investment in the portfolio optimization but ensure that its weighting is at least 10%. Alternatively, you can simply opt to omit the cash investment from the optimization and then add it back into the portfolio by adjusting the weightings accordingly.
