PortfolioAnalytics: BlackLittermanFormula – R documentation

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BlackLittermanFormula

Computes the Black-Litterman formula for the moments of the posterior normal.

Description

This function computes the Black-Litterman formula for the moments of the posterior normal, as described in A. Meucci, "Risk and Asset Allocation", Springer, 2005.

Usage

BlackLittermanFormula(Mu, Sigma, P, v, Omega)

Arguments

`Mu`	[vector] (N x 1) prior expected values.
`Sigma`	[matrix] (N x N) prior covariance matrix.
`P`	[matrix] (K x N) pick matrix.
`v`	[vector] (K x 1) vector of views.
`Omega`	[matrix] (K x K) matrix of confidence.

Value

BLMu [vector] (N x 1) posterior expected values.

BLSigma [matrix] (N x N) posterior covariance matrix.

Author(s)

Xavier Valls flamejat@gmail.com

References

A. Meucci - "Exercises in Advanced Risk and Portfolio Management" http://symmys.com/node/170.

See Meucci's script for "BlackLittermanFormula.m"

PortfolioAnalytics

Portfolio Analysis, Including Numerical Methods for Optimization of Portfolios

v1.1.0

GPL-2 | GPL-3

Authors

Brian G. Peterson [cre, aut, cph], Peter Carl [aut, cph], Kris Boudt [ctb, cph], Ross Bennett [ctb, cph], Hezky Varon [ctb], Guy Yollin [ctb], R. Douglas Martin [ctb]

Initial release

2018-05-17