Beyond Black-Litterman in Practice: A Five-Step Recipe to Input Views on Non-Normal Markets
SYMMYS; Kepos Capital
The copula-opinion pooling (COP) approach extends in principle the Black-Litterman methodology to non-normally distributed markets and views. However, the implementations of the COP framework presented so far rely on restrictive quasi-normal assumptions. Here we present a general recipe to implement the COP approach in practice under all possible market and views specifications.
Number of Pages in PDF File: 15
Keywords: opinion pooling, views, copula, skewness, fat tails, Bayesian prior, posterior, Monte Carlo, quantitative portfolio management, asset allocation, CVaR, expected shortfall, Student t copula, non-parametric estimation
JEL Classification: C11, G11working papers series
Date posted: December 29, 2005
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