A1355
Title: Risk budgeting portfolios under different risk measures: A comparison of alternative computational approaches
Authors: Caterina Pastorino - University of Milano - Bicocca (Italy) [presenting]
Akif Ince - Birkbeck, University of London (United Kingdom)
Pierpaolo Uberti - University of Milano-Bicocca (Italy)
Ilaria Peri - Birkbeck-University of London (United Kingdom)
Abstract: Modern portfolio theory has provided quantitative tools for decades to help investors make better decisions in financial markets. In recent years, a wide range of portfolio construction methods has been developed. Among risk-based approaches, the risk budgeting portfolio has gained popularity. Rather than focusing on the overall portfolio risk, risk budgeting emphasizes the contribution of each asset to the total portfolio risk. It relies on a mathematical framework to decompose the total portfolio risk into individual asset risk contributions. The aim is to investigate risk budgeting portfolios by comparing several computational methods: Traditional optimization techniques, non-linear system and fixed-point algorithm. These approaches are examined in terms of computational efficiency and accuracy. Moreover, the analysis is conducted using different risk measures: Standard deviation, value at risk (VaR), and expected shortfall (ES). The preliminary findings provide valuable information about the performance of the computational methods implemented.
