What is Risk Parity?
Risk Parity A portfolio construction approach that allocates risk equally across asset classes, rather than capital, aiming for balanced risk contribution from each component, as used by institutional investors and codified in professional investment literature (CFA Institute, Bridgewater methodology).
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Risk Parity” Used in Practice?
Risk parity portfolios aim to allocate capital so that each asset class contributes equally to overall portfolio volatility.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Risk Parity?
A portfolio construction approach that allocates risk equally across asset classes, rather than capital, aiming for balanced risk contribution from each component, as used by institutional investors and codified in professional investment literature (CFA Institute, Bridgewater methodology).
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