Black-Litterman Model with Intuitionistic Fuzzy Posterior Return

9 Pages Posted: 4 Jan 2016 Last revised: 11 Dec 2019

See all articles by Krzysztof Echaust

Krzysztof Echaust

Poznań University of Economics

Krzysztof Maciej Piasecki

Poznan University of Economics

Date Written: January 3, 2016

Abstract

The main objective is to present a some variant of the Black-Litterman model. We consider the canonical case when priori return is determined by means such excess return from the CAPM market portfolio which is derived using reverse optimization method. Then the a priori return is at risk quantified uncertainty. On the side, intensive discussion shows that the experts' views are under knightian uncertainty. For this reason, we propose such variant of the Black-Litterman model in which the experts' views are described as intuitionistic fuzzy number. The existence of posterior return is proved for this case. We show that then posterior return is an intuitionistic fuzzy probabilistic set.

Keywords: Black-Litterman model, intuitionistic fuzzy number, quantitaive uncertainty, knightian uncertainty, imprecision

JEL Classification: C02, G11

Suggested Citation

Echaust, Krzysztof and Piasecki, Krzysztof Maciej, Black-Litterman Model with Intuitionistic Fuzzy Posterior Return (January 3, 2016). Available at SSRN: https://ssrn.com/abstract=2710280 or http://dx.doi.org/10.2139/ssrn.2710280

Krzysztof Echaust

Poznań University of Economics ( email )

Poland

Krzysztof Maciej Piasecki (Contact Author)

Poznan University of Economics ( email )

Poznan, 60-967
Poland

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