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# Tag Info

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Without detracting from or disagreeing with the many great answers already given, this one is more of an "information systems management" than a "risk model" problem. It's a classic "should I bespoke, outsource, or off-the-shelf?" dilemma. So then the question becomes whether and/or how the risk you want to model differs from that of the modal/median ...

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I don't think you need have a N>P problem here. Your only problem with 1000 stocks and 250 daily returns would be trying to pull out >250 risk factors versus the classic 1-3 risk factors. If your PC1, PC2 and PC3 have non-zero correlation, then that suggests a problem with methodology and implementation more than with PCA. [I've spent the last decade ...

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PCA is generally a good method when you have a large number of assets $N$ (and in that case, you will rarely have a correspondingly long look-back window $T$). While applying PCA to obtain an equity risk model, you may take note of several points (the first two probably provide the solution your problem): 1. Curse of dimensionality The covariance/...

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I can see the following main reasons to create custom risk-models: Universe/Vendor model mismatch: Your universe of assets does not align with those provided by the vendor. For example, Barra provides US and Global models but say your universe has a number of Canadian and US equities then you may need a custom risk model. You want to use a new/different ...

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