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Financial markets & Corporate Strategy - Grinblatt & Titman The book is very intuitive, but as a consequence less comprehensive than ex. Options, Futures, and other Derivatives by Hull (which is seen as the basic foundation of everything quant in some parts of the industry.) A great entry level book to finance, and is publically avaliable here: ...


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If I had to give only one title this would be it: FT Guide to Understanding Finance by J. Estrada (Second Edition published 2011) It explains all of the above concepts (and more) in a very accessible, yet mathematically correct manner. A sample can be found: Here The only thing is that it is not really short (the first part, i.e. up to p. 150, is ...


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You can do 2 things: incremental risk: Calculate the volatility with the asset and with the asset replaced by cash. The difference gives you the (non-linear) incremental risk contribution of the asset. They don't sum up to $\sigma$. contributions to volatility (Euler allocation) As $\sigma = \sigma^2/\sigma$ you can define risk contributions by $$ ...


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By buying all the state contingent claims you ensure that you will receive 1 USD in the next period (since one of the states will occur), and that is the definition of a risk free security: something that is guaranteed to pay off 1. The price at which it sells today is lower than 1, and that discounting defines the Risk Free rate. If the risk free basket of ...


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Let us ignore the riskless rate for simplicity of the presentation. If you have (historical or simulated) return series $r_i$ for the portfolio and $r_i^M$ for the market, then the beta is the OLS regression beta: $$ \beta = cov(r_i,r_i^M)/var(r_i^M). $$ Then if you write $r_i = \alpha + \beta r_i^M + \epsilon_i$ on the other hand $$ \epsilon_i = r_i - ( ...


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Smart Beta refers a trend in making well known quantitative strategies more accessible to investors. Simple examples for equities include Value, Momentum, Quality, and Low Volatility. Fixed income might include Carry and Credit. Risk parity is a strategy that incorporates several sources of return that may include some of the smart beta strategies mentioned ...


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This is a very good question. It can be argued that risk parity is one example of a smart beta strategy. Yet it is important to understand that both are coming from two different directions: risk parity is basically a form of risk management (in the sense of risk-adjustment) because its basic approach lies in diversification - like the alternative methods ...


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They are not the same as in they are equal, but risk parity can be considered a smart beta strategy. Smart beta is this opaque term that covers anything that can be put into a factor, regressed against returns and adjusted for, but also a host of other non-factor strategies that aim to create a mechanical, non-stock index weighting scheme that is ...


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Maybe. Certainly you shouldn't use their realized return ("past return") because that does not reflect expectations, it reflects events that became known after the client decided on their asset allocation. On the other hand: with a lot of (unrealistic?) assumptions, you CAN discern the client's risk aversion from their allocation. Suppose for example that ...


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This is a resource you may want to look at. https://personal.vanguard.com/pdf/ISGHC.pdf Additionally, this books seems good for this particular topic: Risk Without Reward: The Case for Strategic FX Hedging. Also, take a look at Advanced Bond Portfolio Management: Best Practices in Modeling and Strategies edited by Frank J. Fabozzi, Lionel Martellini, ...


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I don't have a reference for you but I have some experience. Risk management departments at hedge funds and banks would primarily look at the Var in order to capture the risk of an options portfolio. The var indirectly captures all the Greeks in a single measurement , since each Greek generates some exposure. The desk traders would tend to look at all the ...



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