Robustification of Black-Litterman
I'm reading a paper, "Comparison and robustification of Bayes and
Black-Litterman models", by Schottle, Werner and Zagst. It is interesting in how they build up a Bayesian framework to get uncertainty in the variance of the distribution. Usually in Black-Litterman, the only uncertainty in the variance comes from the uncertainty in the estimate of the mean, so this is a way to add another degree of freedom to the problem. I'd like to build up the MATLAB code to work on this and see how it goes.
Of course, I've also come across some interesting papers on factor models with Black-Litterman and need to digest those. So many things to do. I'm adding links and quick descriptions of all the papers to my RSS feed, so you can pick the papers up from there if you are interested.