Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
4959996 | European Journal of Operational Research | 2017 | 9 Pages |
Abstract
We present the most general model of the type considered by Black and Litterman (1991) after fully clarifying the duality between Black-Litterman optimization and Bayesian regression. Our generalization is itself a special case of a Bayesian network or graphical model. As an example, we work out in full detail the treatment of views on factor risk premia in the context of APT. We also consider a more speculative example in which the portfolio manager specifies a view on realized volatility by trading a variance swap.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Petter Kolm, Gordon Ritter,