Black-Litterman method
The Black-Litterman method is a mathematical model for calculating the asset allocation .
The process was developed between 1990 and 1992 by Fischer Black and Robert Litterman . First, a stable return vector is generated with the help of the capital asset pricing model , in order to then calculate a revised return vector using individual forecasts. With an increase of the model of portfolio selection of Harry Markowitz can finally the final portfolio weights of the individual asset classes are determined. With its approach, the model compensates for problems such as estimation error problems, corner solutions and the like, of the classic portfolio selection according to Markowitz.
literature
- F. Black, R. Litterman: Asset Allocation: Combining Investors Views with Market Equilibrium . Goldman Sachs, 1990 (English).
- F. Black, R. Litterman: Global Portfolio Optimization . In: Financial Analysts Journal . September / October, 1992, p. 28-43 (English).
- Ulrich Linnebank: The implementation of a Black Litterman procedure for a multi-asset strategy fund . Hanover 2008.
- Thomas Idzorek: A step-by-step guide to the Black-Litterman-Model: incorporating user-specified confidence levels . Ibbotsen Associates, 2005 (English).