Prior2Posterior: Calculate the full-confidence posterior distributions of Mu...

In R-Finance/Meucci: Collection of functionality ported from the MATLAB code of Attilio Meucci.

Description

\tilde{ μ } \equiv μ + Σ Q' {\big(Q Σ Q' \big)}^{-1} \big( \tilde{μ}_{Q} - Q μ \big), \\ \tilde{ Σ } \equiv Σ + Σ G' \big({\big(G Σ G' \big)}^{-1} \tilde{ Σ }_G {\big(G Σ G' \big)}^{-1} - {\big(G Σ G' \big)}^{-1} \big) G Σ

Usage

  Prior2Posterior(M, Q, M_Q, S, G, S_G)

Arguments

M	a numeric vector with the Mu of the normal reference model
Q	a numeric vector used to construct a view on expectation of the linear combination QX
M_Q	a numeric vector with the view of the expectations of QX
S	a covariance matrix for the normal reference model
G	a numeric vector used to construct a view on covariance of the linear combination GX
S_G	a numeric with the expectation associated with the covariance of the linear combination GX

Value

a list with

M_ a numeric vector with the full-confidence posterior distribution of Mu

S_ a covariance matrix with the full-confidence posterior distribution of Sigma

Author(s)

Ram Ahluwalia [e-mail]

References

http://www.symmys.com/node/158 http://ssrn.com/abstract=1213325 A. Meucci - "Fully Flexible Views: Theory and Practice". See formula (21) and (22) on page 7 See Meucci script Prior2Posterior.m attached to Entropy Pooling Paper

R-Finance/Meucci documentation built on May 8, 2019, 3:52 a.m.