R: Calculate the "feasibility" of the (Black-Litterman)...
posteriorFeasibility
R Documentation
Calculate the "feasibility" of the (Black-Litterman) posterior mean
Description
Attilio Meucci and Gianluca Fusai have suggested using the Mahalanobis distance to assess
the feasibility of a set of Black-Litterman views. This function calculates this distance, along
with a "feasibility" measure based on this distance and the sensitivity of the measure to changes in the "q"
vector.
Usage
posteriorFeasibility(result)
Arguments
result
An object of class BLResult
Details
The feasibility measure proposed by Meucci and Fusai (see the references below) is 1 - F(m), where m is the Mahalanobis distance from
from the prior mean calculated with respect to the prior distribution. F is the chi-squared CDF of n-degrees of freedom, where
n is the number assets in one's universe. It should be noted that in Meucci and Fusai's paper, a version of Black-Litterman is
used in which the tau parameter is always set to 1.
Value
mahalDist
Mahalonobis distance of posterior mean vector from prior mean
mahalDistProb
1 - F(mahalDist), where F is the CDF of the Chi-squared distribution with n = #assets degrees of freedom
sensitivities
Derivatives of mahalDistProb with respect to the elements of the "q" vector in the set of views. Not yet implemented
Warning
It is not clear that the results produced by this routine are entirely sensible, though the calculation
is very straightforward and seems to match the one discussed in the source paper. Use with caution.
Author(s)
Francisco Gochez <fgochez@mango-solutions.com>
References
Fusai, Gianluca and Meucci, Attilio. "Assessing Views", 2002. http://www.symmys.com/AttilioMeucci/Research/PublFinance/PublFinance.html
R version 3.3.1 (2016-06-21) -- "Bug in Your Hair"
Copyright (C) 2016 The R Foundation for Statistical Computing
Platform: x86_64-pc-linux-gnu (64-bit)
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> library(BLCOP)
Error in library(BLCOP) : there is no package called 'BLCOP'
Execution halted