COPPosterior {BLCOP}

Calculate the posterior distribution of the market using copula opinion pooling

Description

COPPosteior uses Attilio Meucci's copula opinion pooling method to incorporate an analyst's subjective views with a prior "official" market distribution. Both the views and the market may have an arbitrary distribution as long as it can be sampled in R. Calculations are done with monte-carlo simulation, and the object returned will hold samples drawn from the market posterior distribution.

Usage

    COPPosterior(marketDist, views, numSimulations = BLCOPOptions("numSimulations"))

Arguments

marketDist

An object of class mvdistribution which describes the prior "official" distribution of the market.

views

An object of class COPViews which describe the subjective views on the market distribution

numSimulations

The number of monte carlo samples to draw during calculations. Each asset in one's universe will have numSimulations samples from the posterior.

Value

An object of class COPResult.

Author(s)

Francisco Gochez <[e-mail]>

References

Attilio Meucci, "Beyond Black-Litterman:Views on Non-normal Markets". See also Attilio Meucci, "Beyond Black-Litterman in Practice: a Five-Step Recipe to Input Views on non-Normal Markets."

See Also

BLPosterior

Examples

    
    ## Not run:     
        # An example based on one found in "Beyond Black-Litterman:Views on Non-normal Markets"
        dispersion <- c(.376,.253,.360,.333,.360,.600,.397,.396,.578,.775) / 1000
        sigma <- BLCOP:::.symmetricMatrix(dispersion, dim = 4)
        caps <- rep(1/4, 4)
        mu <- 2.5 * sigma 
        dim(mu) <- NULL
        marketDistribution <- mvdistribution("mt", mean = mu, S = sigma, df = 5 )
        pick <- matrix(0, ncol = 4, nrow = 1, dimnames = list(NULL, c("SP", "FTSE", "CAC", "DAX")))
        pick[1,4] <- 1
        vdist <- list(distribution("unif", min = -0.02, max = 0))
    
        views <- COPViews(pick, vdist, 0.2, c("SP", "FTSE", "CAC", "DAX"))
        posterior <- COPPosterior(marketDistribution, views)
    
## End(Not run)