Flirting with Models

The Research Library of Newfound Research

Tag: risk parity (Page 2 of 2)

Is My Diversified Commodity Index Just Oil?

"Diversified" commodity indices are often primarily exposed to oil. Balancing risk among different assets can achieve truly diversified commodity exposure.

The Problem with VaR-Driven Allocations

Tail-risk parity attempts to even out the risk a catastrophic losses across the portfolio. However, estimation errors inherent in VaR make this difficult.

Risk Parity: The Devil is in the Details

Standard risk parity implementations focus on volatility and correlation but may overlook duration, liquidity, and forcible deleveraging risks

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

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