Strategy #0000000094 · Asset allocation and risk management
Risk parity and equal risk contribution
Enter two volatilities, correlation, target volatility, leverage cap and return assumptions to inspect weights and exposure.
Risk parity allocates by risk contribution rather than capital share. Two-asset weights depend on volatility and correlation; leverage can then target portfolio volatility, so low-volatility bonds may be leveraged. Leverage, rising stress correlations, financing and rebalancing costs create risk.
A static two-asset illustration; no multi-asset optimisation, margin or stress jumps are modelled.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
What are the equal-risk weights and target-volatility exposure for two assets?
Risk parity allocates by risk contribution rather than capital share. Two-asset weights depend on volatility and correlation; leverage can then target portfolio volatility, so low-volatility bonds may be leveraged. Leverage, rising stress correlations, financing and rebalancing costs create risk.
Enter two volatilities, correlation, target volatility, leverage cap and return assumptions to inspect weights and exposure.
A static two-asset illustration; no multi-asset optimisation, margin or stress jumps are modelled.
- Input assumptionsEnter two volatilities, correlation, target volatility, leverage cap and return assumptions to inspect weights and exposure.
- Model outputA static two-asset illustration; no multi-asset optimisation, margin or stress jumps are modelled.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
RC_i=\frac{w_i(\Sigma w)_i}{w^T\Sigma w},\quad RC_1=RC_2
w is the asset weight vector and Σ the covariance matrix; the example solves two-asset equal risk from volatilities and correlation.
Greeks: the directional intuition
- 模型
- Measures sensitivity to implied volatility.
- 尾部
- Measures sensitivity to implied volatility.
- 執行
- Measures sensitivity to implied volatility.
RC_i=\frac{w_i(\Sigma w)_i}{w^T\Sigma w},\quad RC_1=RC_2
Practical context · published observations
Risk parity and equal risk contribution: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
A static two-asset illustration; no multi-asset optimisation, margin or stress jumps are modelled. Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related structures use different exposures and loss conditions.
Compare allocation, financing and payoff assumptions.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Base structure | Scenario allocation | Risk parity allocates by risk contribution rather than capital share. Two-asset weights depend on volatility and correlation; leverage can then target portfolio volatility, so low-volatility bonds may be leveraged. Leverage, rising stress correlations, financing and rebalancing costs create risk. | A static two-asset illustration; no multi-asset optimisation, margin or stress jumps are modelled. |
| Conservative version | Lower exposure | Reduce notional, leverage or multiplier. | May reduce upside participation. |
| Dynamic version | Periodic rebalance | Reset exposure by risk or regime. | Needs more trading and model governance. |
A static two-asset illustration; no multi-asset optimisation, margin or stress jumps are modelled.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.