[R-SIG-Finance] Black Litterman question
bastian2507hk at yahoo.co.uk
Fri Mar 27 01:06:47 CET 2009
my question is aimed at the Black-Litterman experts. I am constructing a
portfolio consisting of various equity indices and express 1 absolute
view and 1 relative view on another 2 assets.
Additionally, I have to express confidence levels put into each view.
The higher the level the larger the deviation from its equilibrium
weight. Thats my question: Does the tilt from equilibrium necessarily
reach its maximum when my confidence is 100% ?? Or may it reach its
largest tilt at a lower confidence level? Does not sound intuitive, but
my calculations just show that (maximum tilt at 99% confidence to be
Thanks for your input.
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