Portfolio Management Using Black Litterman
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Portfolio Management Using Black Litterman
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Author : Henning Padberg
language : en
Publisher: GRIN Verlag
Release Date : 2008-01-24
Portfolio Management Using Black Litterman written by Henning Padberg and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-01-24 with Business & Economics categories.
Seminar paper from the year 2007 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, University of Münster (Finance Center Münster), course: Betriebliche Finanzierung (Finance Seminar), language: English, abstract: The Black-Litterman optimization model is based on the idea of efficient markets and the capital asset pricing model (CAPM). The BL model enhances standard mean-variance optimization by implementing market views into the optimization process (probability theory). Investors obtain sophisticated and reasonable asset allocations. Portfolio management usually comprises asset allocation decisions with the goal of creating diversified portfolios. Managers can consult quantitative models to support their decision-making process. Fischer Black and Robert Litterman (1992) developed the Black-Litterman (BL) optimization model. It is based on the idea of efficient markets, the capital asset pricing model of Sharpe (1964) and Lintner (1965), as well as the established mean-variance optimization (MVO) developed by Markowitz (1952), and conditional probability theory dating back to Bayes (1763). Starting point of the BL model is the assumption that equilibrium markets and market cap. weights provide the investor with Implied Returns. The BL model uses a mixed estimation technique to incorporate investors’ Views into return forecasts. It is possible to implement relative and absolute opinions regarding expected returns of assets with different levels of confidence. These Views enable an adjustment of equilibrium Implied Returns, which forms a new expectation of BL Revised Implied Returns. As a result of optimization with BL input data, the investor gets new optimal portfolio weights. The motivation of Black and Litterman (1992) to develop a new portfolio optimization tool was a lack of acceptance of the Markowitz algorithm within professional asset managers. There aim was to shape a model which can overcome the weaknesses of MVO and which combines a quantitative and qualitative approach. Consequently, the BL model tackles the weakest point of MVO, its sensitivity to the return forecasts and allows taking active Views. This paper is structured in the following sections: First, it shows the basic principles on which the BL model is founded. Then, it illustrates the model by means of its assumptions, the general approach, and the math involved. Finally, it evaluates the model in a critical review, provides an overview of applicable extensions, and addresses the issues of practicability and behavioral finance.
Active Fixed Income Portfolio Management Using The Black Litterman Model
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Author : Alvaro Maggiar
language : en
Publisher:
Release Date : 2015
Active Fixed Income Portfolio Management Using The Black Litterman Model written by Alvaro Maggiar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
In this paper we study the application of the Black-Litterman model to an active fixed-income portfolio management. We present a rigorous derivation of the model in a general setting and then move on to apply it to active management. We derive the characteristics of the fixed-income portfolio we wish to manage, comprising government bonds, inflation-linked bonds and currencies and present results derived from the application of the BlackLitterman model. We also introduce and use some risk management tools to assess the benefits of using the Black-Litterman model. Finally, we discuss a way to calculate a sound covariance matrix to be used in the optimization process.
Modern Investment Management
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Author : Bob Litterman
language : en
Publisher: John Wiley & Sons
Release Date : 2004-11-19
Modern Investment Management written by Bob Litterman and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-11-19 with Business & Economics categories.
Dieser Band füllt eine echte Marktlücke. "Goldman Sach's Modern Investment" gibt eine Einführung in moderne Investment Management Verfahren, wie sie von Goldman Sachs Asset Management verwendet werden, um erstklassige Investitionsrenditen zu erzielen. Erläutert werden u.a. die moderne Portfoliotheorie (Portfoliodiversifikation zur Risikostreuung), Capital Asset Pricing (Verfahren zur Ermittlung des Risiko-Rendite-Austauschverhältnisses von Finanzanlagen, bei dem der unterschiedliche Risikogehalt von Finanztiteln berücksichtigt wird) sowie eine Reihe aktueller Themen wie z.B. strategische Portfoliostrukturierung, Risikobudgetierung und aktives Portfolio Management. Hier erhalten Sie die Mittel an die Hand, um die Goldman Sachs Asset Management Methode für sich selbst umzusetzen. Das von Fischer Black und Bob Litterman gemeinsam entwickelte Black-Litterman Asset Allocation Model gehört zu den angesehensten und meist verwendeten Modellen zur Portfoliostrukturierung. Litterman und seine Asset Management Group sind oft die treibende Kraft, wenn es um Portfoliostrukturierung und Investmententscheidungen der 100 international größten Pensionsfonds geht.
An Application Of The Black Litterman Model With Egarch M Derived Views For International Portfolio Management
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Author : Steven L. Beach
language : en
Publisher:
Release Date : 2014
An Application Of The Black Litterman Model With Egarch M Derived Views For International Portfolio Management written by Steven L. Beach and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This paper provides an application of the Black-Litterman methodology to portfolio management in a global setting. The novel feature of this paper relative to the extant literature on Black-Litterman methodology is that we use GARCH-derived views as an input into the Black-Litterman model. The returns on our portfolio surpass those of portfolios that rely on market equilibrium weights or Markowitz-optimal allocations. We thereby illustrate how the Black-Litterman model can be put to work in designing global investment strategies.
Modern Investment Management
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Author : Bob Litterman
language : en
Publisher: John Wiley & Sons
Release Date : 2003-07-16
Modern Investment Management written by Bob Litterman and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-07-16 with Business & Economics categories.
Introduces the modern investment management techniques used by Goldman Sachs asset management to a broad range of institutional and sophisticated investors. * Along with Fischer Black, Bob Litterman created the Black-Litterman asset allocation model, one of the most widely respected and used asset allocation models deployed by institutional investors. * Litterman and his asset management group are often a driving force behind the asset allocation and investment decision-making of the world's largest 100 pension funds.
An Improvement Of The Global Minimum Variance Portfolio Using A Black Litterman Approach
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Author : Maximilian Adelmann
language : en
Publisher:
Release Date : 2016
An Improvement Of The Global Minimum Variance Portfolio Using A Black Litterman Approach written by Maximilian Adelmann and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Asset management companies are constantly searching for portfolio optimization models that are on the one hand clear and intuitive and on the other provide high and reliable returns. This paper presents a modified version of the well-known Black-Litterman portfolio optimization approach. Unlike in the original model, the intuitive global minimum variance (GMV) portfolio serves as the reference portfolio. The introduction of a general rule for investors' views in combination with a simplification of the original Black-Litterman approach facilitates the implementation of the model and enables us to remove so-called dead assets from the GMV portfolio. As an additional advantageous feature our model is only based on variance-covariance estimations, and relative return estimations for our general rule. A numerical application of our modified Black-Litterman model to empirical data sets demonstrates that portfolios based on the model clearly outperform the GMV portfolio and the 1/N portfolio in terms of compound annual returns and out-of-sample Sharpe ratios.
Robust Portfolio Optimization And Management
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Author : Frank J. Fabozzi
language : en
Publisher: John Wiley & Sons
Release Date : 2007-04-27
Robust Portfolio Optimization And Management written by Frank J. Fabozzi and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-04-27 with Business & Economics categories.
Praise for Robust Portfolio Optimization and Management "In the half century since Harry Markowitz introduced his elegant theory for selecting portfolios, investors and scholars have extended and refined its application to a wide range of real-world problems, culminating in the contents of this masterful book. Fabozzi, Kolm, Pachamanova, and Focardi deserve high praise for producing a technically rigorous yet remarkably accessible guide to the latest advances in portfolio construction." --Mark Kritzman, President and CEO, Windham Capital Management, LLC "The topic of robust optimization (RO) has become 'hot' over the past several years, especially in real-world financial applications. This interest has been sparked, in part, by practitioners who implemented classical portfolio models for asset allocation without considering estimation and model robustness a part of their overall allocation methodology, and experienced poor performance. Anyone interested in these developments ought to own a copy of this book. The authors cover the recent developments of the RO area in an intuitive, easy-to-read manner, provide numerous examples, and discuss practical considerations. I highly recommend this book to finance professionals and students alike." --John M. Mulvey, Professor of Operations Research and Financial Engineering, Princeton University
Handbook Of Financial Econometrics Mathematics Statistics And Machine Learning In 4 Volumes
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Author : Cheng Few Lee
language : en
Publisher: World Scientific
Release Date : 2020-07-30
Handbook Of Financial Econometrics Mathematics Statistics And Machine Learning In 4 Volumes written by Cheng Few Lee and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-07-30 with Business & Economics categories.
This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.
The Black Litterman Model
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Author : Andi Duqi
language : en
Publisher:
Release Date : 2016
The Black Litterman Model written by Andi Duqi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper aims to implement a portfolio optimization strategy considering two fundamental aspects: the empirical regularities observed in the time series of stock returns, and the views of portfolio managers about these regularities. From an analytical point of view, all the results are examined through an application of the approach of Black and Litterman (1992). In particular, our innovative contribution to the extant literature is the use of the EGARCH-M (exponential GARCH-in-mean) model to formulate a volatility forecast of returns used as an input for determining some subjective views to be included in the Black- Litterman model. The bets of the portfolio manager thus enter into the mechanism of generating expectations about the vector of returns, revealing information about investment opportunities. The results show that the Black-Litterman model using the EGARCH inputs produces allocations with potentially sizeable benefits. Greater reliance on the implied BL excess returns, in setting the allocations, result in higher risk-return ratio.
Portfolio Management Under Stress
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Author : Riccardo Rebonato
language : en
Publisher: Cambridge University Press
Release Date : 2014-01-09
Portfolio Management Under Stress written by Riccardo Rebonato and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-01-09 with Business & Economics categories.
Portfolio Management under Stress offers a novel way to apply the well-established Bayesian-net methodology to the important problem of asset allocation under conditions of market distress or, more generally, when an investor believes that a particular scenario (such as the break-up of the Euro) may occur. Employing a coherent and thorough approach, it provides practical guidance on how best to choose an optimal and stable asset allocation in the presence of user specified scenarios or 'stress conditions'. The authors place causal explanations, rather than association-based measures such as correlations, at the core of their argument, and insights from the theory of choice under ambiguity aversion are invoked to obtain stable allocations results. Step-by-step design guidelines are included to allow readers to grasp the full implementation of the approach, and case studies provide clarification. This insightful book is a key resource for practitioners and research academics in the post-financial crisis world.