Risk Budgeting
First published:
ISBN: 9781906348885
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Risk Budgeting for Active Investment Managers
Robert Litterman, Jacques Longerstaey, Jacob Rosengarten, Kurt Winkelmann
Risk Governance and Risk Appetite
Value-at-Risk: A Dissenting Opinion
Holistic Risk Budgeting
Theory of Risk Budgeting
Risk Budgeting for Active Investment Managers
Pension Funds and Incentive Compensation: A Based on the Ontario Teachers’ Experience
Risk Budgeting for Banks
Risk Budgeting in the Evolution of Insurance Company Risk Management
Hedge-Fund Risk Budgeting
Private Equity Risk Budgeting
In most investment contexts the returns portfolio managers create are compared to those of an index of the returns of the relevant market. This is a reasonable standard if the relevant index returns are available to the client at relatively low cost. In this context tracking error11“Tracking error”, usually measured in basis points, refers to the annualised volatility of the returns of a portfolio relative to its benchmark. In some cases a portfolio may not have an explicit benchmark, or the benchmark may be a risk-free rate; in those contexts tracking error refers to the volatility of the excess returns relative to the risk-free rate. measures the relevant risk – the risk relative to such a benchmark – that the portfolio manager is taking in order to add excess return. Clients have a responsibility as well not only to discuss risk expectations about the absolute returns of a portfolio, but also to provide clear guidance about how much risk relative to a benchmark (sometimes referred to as “active risk”) they expect the portfolio manager to take.
Why do we need a green zone?22The concept of attributing a colour coding to define ranges in risk management was first coined by those
