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-diversified portfolio,
- Allow the investors to define 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 condent about the future returns of these funds.
Keywords: Black-Litterman, Mean-Variance optimization, Mean-Conditional VaR optimization, Mean-Modified VaR optimization
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