Macro Hive Conversations With Bilal Hafeez cover image

Ep. 208: David Dredge on Inflation, Underpriced Risks and Sharpe Ratio Flaws

Macro Hive Conversations With Bilal Hafeez

CHAPTER

Harnessing Convexity for Risk Mitigation in Large Portfolios

The chapter delves into the concept of owning convexity through options to protect investments in large portfolios. It critiques traditional performance metrics, advocating for measuring success based on the relationship between total volatility and downside volatility. The narrative compares the advantages and challenges of being long an asset versus being long a liability, emphasizing the importance of risk mitigation strategies in capturing potential gains.

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