Black-Litterman Based Portfolio Optimization

3 Pages Posted: 20 Oct 2012 Last revised: 4 Dec 2012

Date Written: September 7, 2012

Abstract

This article presents an example of portfolios optimized by AlternativeSoft's BL model based optimization with the following objectives:

- Minimize the portfolio volatility,

- Produce a well-diversi fied portfolio,

- Allow the investors to de fine their views (absolute as well as relative) on the funds' (mutual funds and hedge funds) expected returns,

- Tilt the portfolio from an equally weighted portfolio towards the funds with good future expected returns if the investors are con dent about the future returns of these funds.

Keywords: Black-Litterman, Mean-Variance optimization, Mean-Conditional VaR optimization, Mean-Modified VaR optimization

Suggested Citation

Nehra, Krishna and Favre, Laurent, Black-Litterman Based Portfolio Optimization (September 7, 2012). Available at SSRN: https://ssrn.com/abstract=2143142 or http://dx.doi.org/10.2139/ssrn.2143142

Krishna Nehra (Contact Author)

AlternativeSoft.com ( email )

Alternative Software Development
Witikonerstrasse 54
8032 Zurich
United States

HOME PAGE: http://www.alternativesoft.com/

Laurent Favre

AlternativeSoft ( email )

London
United Kingdom

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