Most textbook finance literature assumes risk to be the standard deviation of returns (volatility), which is not only … is consistent with investors’ actual perception of risk. Our method is presenting investors return distributions with … different risk characteristics for which they have to state their perceived risk and make investment decisions. Our results hint …

We introduce a class of quantile-based risk measures that generalize Value at Risk (VaR) and, likewise Expected … probability of occurrence. The corresponding risk measure, called Loss VaR (LVaR), determines the minimal capital injection that … and applications to capital adequacy, portfolio risk management and catastrophic risk are presented …

Portfolio construction and risk budgeting are the focus of many studies by academics and practitioners. In particular … diversification based on the decomposition of the portfolio's risk into risk factor contributions. First, we expose the relationship … between risk factor and asset contributions. Secondly, we formulate the diversification problem in terms of risk factors as an …

Risk parity is an asset allocation strategy designed so each asset class contributes equally to overall portfolio risk … (as measured by volatility). While risk parity offers potential advantages, its success hinges on key assumptions and a … favorable environment for bonds. Like the traditional asset allocation approach it seeks to supplant, risk parity demands a long …

The risks embedded in asset-based risk parity portfolios are explored using a simple, economically motivated approach … asset-based risk parity portfolios. Investors in risk parity can use this approach for more robust portfolio construction … and for benchmarking and differentiating various risk parity approaches …

This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset …, we obtain analytical formulas for computing asset risk contributions of a given portfolio. Therefore, we define risk … mix policy. When assets exhibit jump risks like the short volatility strategy, we show that skewness-based risk parity …

out some key issues on how the credit risk associated to these products can be reduced and, finally, in the last section …

Risk parity is a portfolio construction technique that scales sections of a portfolio—e.g., stocks, bonds, currencies …, commodities—so that forecasted contributions to net portfolio risk match the budget. Because risks are measured from a point … to find a risk parity weighting that doesn't count on perfectly optimized hedges and is robust to changes in regime …

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion … may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA … their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. …

. Under this paradigm the maximum diversification portfolio is equivalent to a risk parity strategy with respect to the … uncorrelated risk sources embedded in the underlying portfolio assets. Our paper characterizes the mechanics and properties of this … diversified risk parity strategy. Moreover, we explore the risk and diversification characteristics of traditional risk …