Flirting with Models

The Research Library of Newfound Research

Month: December 2012 (Page 1 of 2)

Statistics Without Context are Just Numbers

Statistics are very prevalent in the field of finance, but they can be misleading. Two numbers need context for an accurate comparison.

The Dangers of Bad Risk Parity Implementations

Risk parity allocates so that all assets contribute equally to risk, but many implementations focus solely on volatility and neglect risks like rising rates

Predicting, Forecasting and Black Swans

Black swans, by definition, are unknowns unknowns. When we design models, we incorporate rules to mitigate the risk of model failure regardless of cause.

Using Randomness to Price the Value-Add of Risk Management Strategies

Randomness, through statistical simulations, can shed light on the fees charged for tactical strategies by comparison to an analogous options strategy.

Capital Diversification versus Risk Diversification

Capital diversification may indicate that our portfolio is well-balanced when it is actually be highly concentrated. Risk diversification remedies this.

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