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Questions tagged [risk-parity]

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3
votes
1answer
184 views

Implementing leveraged Risk Parity Portfolio using Direxion 3X ETF

The "common man" version of a leveraged Risk Parity portolio (40% stocks and 60% long term bond, Quarterly Rebalanced) can now be easily implemented using the 3X leveraged ETF's (UPRO=stocks, TMF=...
2
votes
0answers
44 views

Fixed Income portfolio type

Could someone kindly point me toward a primer that would cover the various type of fixed income portfolio strategies under modern portfolio theory ? In a nutshell, I would like to know what kind of ...
1
vote
1answer
63 views

How to construct a risk parity Portfolio by fixing the portfolio volatility on a desired level?

I would like to get the weights of a risk parity portfolio (equal risk contribution). Therefore I use following formulas: $\sigma(w)=\sqrt{w' \Sigma w}$ $\sigma_i(w)= w_i \times \partial_{w_i} \...
0
votes
2answers
217 views

Equal Risk Contribution portfolio scipy optimization not working

I'm trying to create a tool for an equal risk contribution portfolio,essentially following this article (https://quantdare.com/risk-parity-in-python/) but it is failing at the last step (def ...
2
votes
2answers
83 views

Can the dependent samples t test be used for this problem?

Short story: I have 2 sets of data: Set 1: Daily data of stock market returns (eg. [1%, 1.2%, -2%]) Set 2: Those same stock market returns, multiplied by a number (eg. [2%, 0.6%, -1%] which equals ...
4
votes
2answers
228 views

Risk Parity / Equal Risk Contribution with Tail Risk Measures

Risk Parity or (synonymous) Equal Risk Contribution is an approach to portfolio construction which could work in theory with a broad class of risk measures. Yet, all references I have found so far ...
1
vote
1answer
252 views

How to understand this Risk Parity Algorithm?

I am trying to understand an optimization algorithm to achieve risk parity in a portfolio. I need some help figuring out the notation in the following formula: I found this on THIS paper. I ...
3
votes
4answers
573 views

Are smart beta and risk-parity the same?

From what I have been reading online, smart beta ETFs aim to use a different type of weighting (instead of by market cap as traditional ETFs like SPY do to track an index) to achieve positive ...
7
votes
3answers
13k views

How to construct a Risk-Parity portfolio?

If I would like to construct a fully invested long-only portfolio with two asset classes (Bonds $B$ and Stocks $S$) based on the concept of risk-parity. The weights $W$ of my portfolio would then be ...