Extreme Events – Specimen Question A.6.2(d) – Answer/Hints

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Q. Set out a series of return and covariance assumptions which results in the same mean-variance asset allocation as in (c) but without using the Black-Litterman methodology.


This is merely another example of calculation of implied alpha. It can therefore be achieved by running the optimisation outputs provided by the answer to A.6.2(c) through a reverse optimiser.


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