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Volatility (often defined in terms of standard deviation of returns, or in terms of implied volatility from option markets) is indeed one measure of risk, but like any single measure of risk, it is incomplete. Part of the reason for this is that in financial markets, the returns are not normally distributed but rather have "fat tails." This means that ...


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Have you considered Marginal Contribution to Total risk (MCTR)? You can decompose your risk across securities/sub-sectors/sectors, such that sum(weight of security * MCTR of security ) = portfolio risk (standard deviation). A good discussion on the topic can be found in Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and ...



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