Black-Litterman Based Portfolio Optimization – Sept 2012 Adobe PDF icon

Dr Krishna Nehra & Laurent Favre – AlternativeSoft AG

This article presents an example of portfolios optimized by AlternativeSoft’s BL model based optimization with the following objectives:
- Minimize portfolio volatility
- Produce a well-diversified portfolio
- Allow the investors to define their views (absolute as well as relative) on the funds’ (mutual funds and hedge funds) expected returns,
- Tilt the portfolio from an equally weighted portfolio towards the funds with good future expected returns if the investors are con dent about the future returns of these funds.

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