We introduce a new framework, Realized GARCH, for the joint modeling of returns and realized measures of volatility. A key feature is a measurement equation that relates the realized measure to the conditional variance of returns. The measurement equation facilitates a simple modeling of the...

We study the econometric properties of dynamic risk parity, which volatility scales to equalise risk through time using the precision process, the inverse of the time-varying volatility. A particular focus is on the impact of the Sharpe ratio. We give necessary and suffcient conditions that...