# Questions tagged [bayes-theory]

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254 views

### Bayesian strategy selection

I have N strategies/signals that I would like to allocate to. I want to estimate an estimate of future performance based off of recent realized performance (momentum of strategies per se - e.g. ...
377 views

### Is an arbitrary prior for Black-Litterman valid? Or do we need a market implied one?

I went through The Black-Litterman Approach: Original Model and Extensions - see also. The BL approeach starts with a prior on the expected returns vector derived from the hypothesis that the market ...
99 views

### Critical Appraisal of Approaches countering Parameter Uncertainty in Portfolio Optimization

It is very hard to come up with legit and solid advantages and drawbacks of the various approaches wich are trying to counteract parameter uncertainty in portfolio optimization procedures. In my ...
324 views

### Bayesian analysis in R: Probability of default, low default portfolios

I want to apply the knowledge of this paper (Bayesian estimation of probabilities of default for low default portfolios, by Dirk Tasche) in R, but I can't find the right bayesian package and functions ...
165 views

### Bayesian logit model in Psychometric or Behavioural Testing for Credit Scoring in Developing Countries

A lot of parameters in one title, I know. So there's credit scoring but not using credit history. Then there's using a Bayesian logit model. Then there's doing so in a developing country such as Haiti ...
191 views

### Identifiability of a state space model (Dynamic Linear Model)

Take a general linear Gaussian state space model (SSM)(aka Dynamic Linear Model DLM): $X_{t+1}=FX_t + V_t$ $Y=HX_t+W_t$ $V_t \sim N(0,Q)$ $W_t \sim N(0,R)$ I am interested in the ...
658 views

### Why model the variance-covariance matrix as an inverse-Wishart distribution in bayesian portfolio analysis?

I am following Risk and asset allocation (Attilio Meucci,2007). I must say I am enjoying this reading quite a lot so I hope nobody takes my question as a critique on the text. When we are introduced ...
52 views

### Rationale for likelihood function parameter choice in Black-Litterman model?

So we are interested in a PDF for equilibrium returns given the views. Why do we choose our view means as the mean parameter and observed market covariance as the covariance parameter? Seems a bit ...
47 views

### Knightian Uncertainty Iff Bayesian Probabilistic View Point

If an investor operates under knightian uncertainty, does that investor then have a Bayesian viewpoint on probability implicitly, and vice versa? Has this been answered or do I have a poor ...
51 views

### Normal default probability vs forward default probability/conditional default

is the diagram correct in calculating foward PD(conditional default) ? Or should the formula be Probability of default = probability of survival x forward PD Which of this is equal to marginal PD(...
When calculating ECLs for loans under IFRS 9, one of the requirements is that the PD estimates have to be Point-in-time ($PD_{PIT}$) rather than through-the-cycle ($PD_{TTC}$).The setting is as ...
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