In MangoTheCat/BLCOP: Black-Litterman and Copula Opinion Pooling Frameworks

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BLCOP

The {BLCOP} package is an implementation of the Black-Litterman and copula opinion pooling frameworks. The Black-Litterman model was devised in 1992 by Fisher Black and Robert Litterman. Their goal was to create a systematic method of specifying and then incorporating analyst/portfolio manager views into the estimation of market parameters.

BLViews() and COPViews() construct views objects
addBLViews() and addCOPViews() allow more views to be added to existing objects
distribution() and mvdistribution() create distribution and mvdistribution objects
BLPosterior() calculates the posterior distribution using the Black-Litterman model
COPPosterior() calculates the posterior distribution using copula opinion pooling

Installation

You can install the released version of BLCOP from CRAN with:

install.packages("BLCOP")

And the development version from GitHub with:

# install.packages("devtools")
devtools::install_github("MangoTheCat/BLCOP")

Example

library(BLCOP)

# For a matrix of monthly returns for 6 assets
head(monthlyReturns)

# Define a pick matrix (a vector of confidences)
pickMatrix <- matrix(c(1/2, -1, 1/2, 0, 0, 0), 
                     nrow = 1, 
                     ncol = 6)

# Create a views object
views <- BLViews(P = pickMatrix,
                 q = 0.06, 
                 confidences = 100,
                 assetNames = colnames(monthlyReturns))

# Determine the posterior distribution of these assets
BLPosterior(monthlyReturns, views, tau = 1/2, marketIndex = sp500Returns)