Abstract

http://ssrn.com/abstract=1542083
 
 

References (7)



 
 

Citations (1)



 


 



Fully Flexible Extreme Views


Attilio Meucci


SYMMYS

David Ardia


Laval University - Département de Finance et Assurance; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Simon Keel


Aeris Capital AG

January 25, 2010

Journal of Risk, Vol. 14, No. 2, pp. 39-49, Winter 2011/2012

Abstract:     
We extend the Fully Flexible Views generalization of the Black-Litterman approach to effectively handle extreme views on the tails of a distribution.

First, we provide a recursive algorithm to process views on the conditional value at risk, which cannot be handled directly by the original implementation of Fully Flexible Views.

Second, we represent both the prior and the posterior distribution on a grid, instead of by means of Monte Carlo scenarios: this way it becomes possible to cover parsimoniously even the far tails of the underlying distribution. Documented code is available for download.

Number of Pages in PDF File: 11

Keywords: Entropy Pooling, Kullback-Leibler, Black-Litterman, VaR, CVaR, grid-probability pair, Monte Carlo, Gauss-Hermite polynomials, Newton-Raphson, kernel estimator

JEL Classification: C1, G11

Accepted Paper Series


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Date posted: January 25, 2010 ; Last revised: January 12, 2012

Suggested Citation

Meucci, Attilio and Ardia, David and Keel, Simon, Fully Flexible Extreme Views (January 25, 2010). Journal of Risk, Vol. 14, No. 2, pp. 39-49, Winter 2011/2012. Available at SSRN: http://ssrn.com/abstract=1542083

Contact Information

Attilio Meucci (Contact Author)
SYMMYS ( email )
HOME PAGE: http://www.symmys.com
David Ardia
Laval University - Département de Finance et Assurance ( email )
Pavillon Palasis-Prince
Quebec G1K 7P4
Canada
+1 418-656-2131 (Phone)
Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE) ( email )
Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada
Simon Keel
Aeris Capital AG ( email )
Schützenstrasse 4
Pfäffikon SZ
Switzerland
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