The Black-Litterman Model in Detail

65 Pages Posted: 28 Jan 2009 Last revised: 23 Jun 2014

See all articles by Jay Walters, CFA

Jay Walters, CFA

Boston University - Metropolitan College - Department of Computer Science

Date Written: June 20, 2014


In this paper we survey the literature on the Black-Litterman model. This survey is provided both as a chronology and a taxonomy as there are many claims on the model in the literature. We provide a complete description of the canonical model including full derivations from the underlying principles using both Theil's Mixed Estimation model and Bayes Theory. The various parameters of the model are considered, along with information on their computation or calibration. Further consideration is given to several of the key papers, with worked examples illustrating the concepts.

Keywords: quantitative portfolio management, asset allocation, Black-Litterman, mixed-estimation

JEL Classification: C11, G11

Suggested Citation

Walters, Jay, The Black-Litterman Model in Detail (June 20, 2014). Available at SSRN: or

Jay Walters (Contact Author)

Boston University - Metropolitan College - Department of Computer Science ( email )

United States

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