Portfolio Optimization Based on Transformer-GAN Enhanced Black–Litterman Framework for Quantitative Analysis

Abstract

Portfolio optimization remains a challenging problem due to the dynamic, nonlinear, and uncertain characteristics of financial markets. Traditional portfolio construction approaches, including mean variance optimization and conventional Black–Litterman models, often suffer from inaccurate estimation of expected returns and unstable allocation caused by parameter uncertainty. These limitations become more significant under structural breaks, regime transitions, volatility clustering, and extreme market events. This study proposes a Transformer-GAN enhanced Black–Litterman framework (TG-BL) that integrates temporal representation learning, uncertainty-aware scenario generation, and Bayesian portfolio optimization. The proposed framework consists of three complementary components. First, a Transformer-based encoder is employed to extract long- range temporal dependencies and latent market representations from historical financial sequences. Second, a conditional Generative Adversarial Network (GAN) is introduced to generate diverse future return scenarios conditioned on Transformer- derived market representations, enabling probabilistic modeling of future uncertainty rather than deterministic prediction. Third, the generated return distributions are incorporated into the Black–Litterman framework through dynamically calibrated views and confidence estimation. Unlike conventional approaches that directly replace equilibrium returns with machine-generated predictions, the proposed method preserves the Bayesian structure of Black–Litterman by adjusting the influence of model- generated views according to predictive uncertainty. This mechanism allows AI- based forecasts to complement rather than dominate market equilibrium information. Extensive experiments are conducted using historical financial data under multiple market conditions. The evaluation framework includes portfolio performance comparison, GAN-generated scenario validation, robustness analysis under volatility and liquidity stress, and component- wise ablation experiments. The results demonstrate that the proposed TG-BL framework improves risk-adjusted portfolio performance while maintaining robustness against market uncertainty. The findings indicate that the integration of temporal feature extraction, uncertainty modeling, and Bayesian portfolio allocation provides an effective decision-support framework for quantitative investment management.