Black-litterman model with intuitionistic fuzzy posterior return

Krzysztof Echaust , Krzysztof Piasecki

Abstract

The main objective of this paper is to present a variant of the Black-Litterman model. We consider the canonical expression of the model where the prior return is determined by means of the excessreturn from the CAPM market portfolio, derived using the reverse optimization method. As such, the prior return is at risk of quantified uncertainty. On the other hand, extensive discussion indicates that experts’ views are under Knightian uncertainty. For thisreason, we propose a variant of the Black-Litterman model in which experts’ views are described as intuitionistic fuzzy numbers. The existence of posterior return is proved for this case and shown to be an intuitionistic fuzzy probabilistics.
Author Krzysztof Echaust (WIiGE / KBO)
Krzysztof Echaust,,
- Department of Operations Research
, Krzysztof Piasecki (WZ / KIiN)
Krzysztof Piasecki,,
- Department of Investment and Real Estate
Journal seriesAestimatio-The IEB International Journal of Finance, ISSN 2173-0164, e-ISSN 2173-1926, (0 pkt, indicated Indexes)
Issue year2017
No15
Pages8-19
Publication size in sheets0.55
Keywords in English Black-Litterman model, Intuitionistic fuzzy number, Quantitative uncertainty, Knightian uncertainty, imprecision
DOIDOI:10.5605/IEB.15
URL http://www.ieb.es/wp-content/uploads/2016/10/aestimatio/3.pdf
Languageen angielski
Score (nominal)15
Score sourcejournalIndex
ScoreMinisterial score = 15.0, 02-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0
Citation count*3 (2020-09-18)
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