Black-Litterman model with intuitionistic fuzzy posterior return

Krzysztof M. Piasecki ,  Krzysztof Echaust 

Uniwersytet Ekonomiczny w Poznaniu (UEP), Al. Niepodległości 10, Poznań 61-875, Poland

Abstract

The main objective is to present a  variant of the Black - Litterman model. We consider the canonical case when a priori return  is determined by means of such excess return from the CAPM market portfolio which is derived using reverse optimization method. Then the a priori return is at risk of quantified uncertainty. On the other side, intensive discussion shows that the experts‘ views are burdened with knightian uncertainty. For this reason, we propose a variant of the Black - Litterman model in which the experts‘ views are described as intuitionistic fuzzy number. The existence of a posterior return is proved for this case.We show that then posterior return is an intuitionistic  fuzzy probabilistic set. 

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Presentation: Oral at Current Economic and Social Topics 2015, by Krzysztof M. Piasecki
See On-line Journal of Current Economic and Social Topics 2015

Submitted: 2015-09-30 21:52
Revised:   2015-09-30 21:52
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