Abstract

http://ssrn.com/abstract=1395283
 
 

References (19)



 


 



Generalised Factor View Blending: Augmented Black-Litterman in Non-Normal Financial Markets with Non-Linear Instruments


Wing Cheung


affiliation not provided to SSRN

April 28, 2009


Abstract:     
The augmented Black-Litterman (ABL) model is an elegant view processor, as well as a natural, robust and unified allocation framework suitable for multiple investment styles (Cheung, 2009B&C). In this paper, we extend the model into a generalised factor view blending (GFVB) framework, suitable for tail risk-aware allocation in non-normal markets with non-linear instruments, factor structures and views. We highlight the following features: 1) Freedom in considering any market factor structure with any security and factor distributions, 2) Generic prior distribution without normality restrictions, 3) Freedom in forming non-linear, non-normal views, 4) View blending strictly based on the Bayes' Rule, 5) A structural approach to constructing portfolio of exotic products.

Number of Pages in PDF File: 24

Keywords: Augmented Black-Litterman (ABL), view blending and shrinkage, Bayes' Rule, CAPM, semi-strong market efficiency, non-normality, non-linear factor model, Monte Carlo, Bayesian posterior sampling, portfolio construction, optimisation, robustness, CVaR minimisation

JEL Classification: C10, C11, C15, C61, G11, G14

working papers series





Download This Paper

Date posted: August 25, 2009 ; Last revised: December 24, 2012

Suggested Citation

Cheung, Wing, Generalised Factor View Blending: Augmented Black-Litterman in Non-Normal Financial Markets with Non-Linear Instruments (April 28, 2009). Available at SSRN: http://ssrn.com/abstract=1395283 or http://dx.doi.org/10.2139/ssrn.1395283

Contact Information

Wing Cheung (Contact Author)
affiliation not provided to SSRN
Feedback to SSRN


Paper statistics
Abstract Views: 1,790
Downloads: 512
Download Rank: 30,042
References:  19

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.562 seconds