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Review and improve black_litterman, BCG_complete_mkts, BCG_incomplete… - #384

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@mmcky

@mmcky mmcky commented Sep 17, 2026

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…_mkts

Correct mathematical and code errors, apply QuantEcon style, and add three exercises with dropdown solutions to each lecture.

black_litterman:

  • Fix the T operator closed form, relative entropy definition, robust objective display, Leamer program, regularization mapping, ridge matrix, standardization, and the appendix variance bound; add the closed form for B(h)
  • Explain the role of tau, note that robustness rescales positions without changing signs, correct the sampling-frequency direction, cite Merton (1980), seed the Numba Monte Carlo, and use d_m for the Black-Litterman weights

BCG_complete_mkts:

  • Fix the Arrow price formula, consumer Lagrangian and FOCs, allocation subscripts, and shock/loading ranges; correct code comments and labels
  • Distinguish the market value of securities from net firm value, fix a forward reference, call chi_i loadings, and interpret the 3D figure

BCG_incomplete_mkts:

  • Fix dp/dk, default-state bond payoffs, notation slips, and the off_eq_check integrand; add Makowski (1983) citation
  • Warn when the equilibrium hits a corner, clarify the role of Eqn2, sharpen the comfort check and stability wording, fix the density grid, clip the default threshold, and delete dead commented-out code

…_mkts

Correct mathematical and code errors, apply QuantEcon style, and add
three exercises with dropdown solutions to each lecture.

black_litterman:
- Fix the T operator closed form, relative entropy definition, robust
  objective display, Leamer program, regularization mapping, ridge
  matrix, standardization, and the appendix variance bound; add the
  closed form for B(h)
- Explain the role of tau, note that robustness rescales positions
  without changing signs, correct the sampling-frequency direction,
  cite Merton (1980), seed the Numba Monte Carlo, and use d_m for the
  Black-Litterman weights

BCG_complete_mkts:
- Fix the Arrow price formula, consumer Lagrangian and FOCs, allocation
  subscripts, and shock/loading ranges; correct code comments and labels
- Distinguish the market value of securities from net firm value, fix a
  forward reference, call chi_i loadings, and interpret the 3D figure

BCG_incomplete_mkts:
- Fix dp/dk, default-state bond payoffs, notation slips, and the
  off_eq_check integrand; add Makowski (1983) citation
- Warn when the equilibrium hits a corner, clarify the role of Eqn2,
  sharpen the comfort check and stability wording, fix the density grid,
  clip the default threshold, and delete dead commented-out code

Co-Authored-By: Claude Opus 5 <noreply@anthropic.com>
Copilot AI lite review requested due to automatic review settings September 17, 2026 22:42
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🔵 Needs a closer look

The PR makes broad, math-heavy changes across multiple lectures (including executable code cells) that should be validated by a full build/run by a human reviewer.

Pull request overview

This PR revises three QuantEcon-style lecture notebooks to correct mathematical derivations, fix/clarify accompanying Python code, and extend the pedagogy with new exercises (including dropdown solutions), plus adds supporting bibliography entries.

Changes:

  • Updates Black–Litterman and robust-control exposition (math corrections, clearer interpretation of parameters like τ, improved simulations, and new exercises/solutions).
  • Corrects incomplete- and complete-markets BCG lecture derivations and code (pricing/payoff formulas, equilibrium-check logic, numerical safeguards, clearer narrative).
  • Adds new citations to the shared BibTeX database to support the updated text.
File summaries
File Description
lectures/black_litterman.md Fixes/clarifies BL + robustness math, improves simulation reproducibility, and adds 3 exercises with dropdown solutions.
lectures/BCG_incomplete_mkts.md Corrects payoff/FOC expressions and strengthens equilibrium verification + stability discussion; adds exercises/solutions.
lectures/BCG_complete_mkts.md Corrects Arrow pricing / planner-consumer equations and updates code/documentation; adds exercises/solutions.
lectures/_static/quant-econ.bib Adds Makowski (1983) and Merton (1980) bibliography entries referenced by the lectures.
Review details
  • Files reviewed: 4/4 changed files
  • Comments generated: 1
  • Review effort level: Lite

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Comment thread lectures/black_litterman.md Outdated
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github-actions Bot temporarily deployed to pull request September 17, 2026 22:53 Inactive
Co-authored-by: Copilot Autofix powered by AI <175728472+Copilot@users.noreply.github.com>
@github-actions
github-actions Bot temporarily deployed to pull request September 19, 2026 02:17 Inactive
BCG_complete_mkts: call V-tilde + pb the market value of the firm's
securities in exercise 1, matching the lecture body; fix four typos.

BCG_incomplete_mkts: let the exercise helper pass on solve_eq's corner
warning instead of swallowing it; print k and b where the prose quotes
them; drop three leftover commented-out lines.

black_litterman: use mu_BL and delta_m consistently, replace the
undefined w_BL with w_m, and use gamma_h(k) in the Bartlett sum.

Co-Authored-By: Claude Fable 5.1 <noreply@anthropic.com>
@github-actions
github-actions Bot temporarily deployed to pull request September 20, 2026 02:47 Inactive
@jstac
jstac merged commit d1f6ec2 into main Sep 20, 2026
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@jstac
jstac deleted the tom_penn branch September 20, 2026 02:50

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pull request — a92ed06f Deployed Sep 20, 2026 by github-actions[bot]
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4 participants