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Risk Budgeting Across active managers

SyroneDavid

New Member
Hi everyone, @David Harper CFA FRM ,

Is there a spreadsheet for this? doesnt seem to be included in the course material (only for the example for risk budgeting across asset class)

Having a hard time deriving the numbers myself, also cause i am not sure which numbers are given as an assumption and which ones are calculated

Thanks!

mukeshramawat

New Member
Hi David. Could you please help me understand how you arrived at Relative Risk Budget numbers ?

mukeshramawat

New Member
Never mind. I figured it out. its 4%*2.33*525.

David Harper CFA FRM

David Harper CFA FRM
Staff member
Subscriber
Hi @mukeshramawat glad you figured it out You hopefully realize this is my XLS recreation of Jorion's Table 17-4. As you've already noted, the Portfolio's Relative Risk Budget value is given by $525.0 (in total to allocate) * 4.0% TEV * 2.326 (i.e., 99% confident normal deviate) =$48.85. Then Manager 1's Budget = $291 Allocated Principal * 6.0% TEV * 2.326 where$291 = 55% * \$525 and where 55% = IR(Mgr_1)/IR(Port) * [TEV(Port)/TEV(Mgr_1)] = 0.60/0.72 * (4.0%/6.0%). Thanks,

mukeshramawat

New Member
That's correct. Thank you!!