Jay's Asset Allocation Blog

Blog about my off-hours work on the problem of Asset Allocation including but not limited to Portfolio Optimization algorithms, algorithms and approaches for improved estimation of Asset Allocation inputs and other potentially related items.

Tuesday, November 25, 2008

Updating the Black-Litterman paper

Had to stop work on all the other fun things to update the paper on Black-Litterman. Turns out the section on Idzorek's method has some inconsistencies in the example tables (all the A ones don't make much sense), though the formulas and the results are all good. Anyways, that needs to be rewritten and I'm adding a section on Braga and Natale's work on TEV, probably a consistent example across Meucci and Fusai, and Braga and Natale to show how the two methods of measuring distance differ. I'd also like to add a third metric, but not finding one I like that much so far.

Then it's on to updating the website and adding some more SciLab scripts for various Black-Litterman examples.

Friday, November 7, 2008


After switching to use the GPL open source linear optimizer lp_solve I can now optimize an asset allocation with a CVaR objective. It does not look quite as exciting as I had hoped, and it is slow, but it will be an interesting new tool in the toolbox.

Next stop will probably be back to work on some Black-Litterman ideas and maybe providing some richer (but accessible) tools which implement it. I still have in the back of my mind that I'd like to know if using posterior variance makes the results better or worse. I would also like to come up with a standard set of data to apply across all the various methods so that they could be compared apples to apples in one place.

Always lots to do.