Q4: Scott Sanderson – Portfolio Optimization: Risk Preferences In, Trades Out
Chat With Traders
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How to Estimate Future Risk Exposure to Risk Factors
A risk factor is just kind of the returns on some asset. Examples would be the market itself or value in which you construct a portfolio where you go long high value stocks short low value stocks. A risk model tries to Estimate future risk exposure to these risk factors and usually how they do it is by looking at like trailing windows.
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