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Fully Flexible Views and Stress-testing

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Fully Flexible Views and Stress-testing

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02 Sep 2008 (Updated )

Full generalization of Black-Litterman and related techniques via entropy pooling

[M_, S_]=Prior2Posterior(M,Q,M_Q,S,G,S_G)
function [M_, S_]=Prior2Posterior(M,Q,M_Q,S,G,S_G)

M_=M+S*Q'*inv(Q*S*Q')*(M_Q-Q*M);
S_=S+(S*G')*( inv(G*S*G')*S_G*inv(G*S*G') -inv(G*S*G') )*(G*S);

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