The “Checklist” > 1 Risk Drivers Identification > Strategies

StrategiesStrategy: sequence of rebalancing decisions that generates a stream of P&LΠt−1→t

• How to model strategies?

ARPM - Advanced Risk and Portfolio Management - arpm.co This update: Mar-28-2017 - Last update

The “Checklist” > 1 Risk Drivers Identification > Strategies

StrategiesStrategy: sequence of rebalancing decisions that generates a stream of P&LΠt−1→t

• How to model strategies?1 Managed exposure strategies (constant/mean reverting absolute measures

of exposure)

2 Managed reinvestment strategies (constant/mean reverting relativemeasures of exposure)

More on strategies, see Chapter 9b

ARPM - Advanced Risk and Portfolio Management - arpm.co This update: Mar-28-2017 - Last update

The “Checklist” > 1 Risk Drivers Identification > Strategies

StrategiesStrategy: sequence of rebalancing decisions that generates a stream of P&LΠt−1→t

• How to model strategies?1 Managed exposure strategies (constant/mean reverting absolute measures

of exposure)

2 Managed reinvestment strategies (constant/mean reverting relativemeasures of exposure)

More on strategies, see Chapter 9b

Managed exposure strategies risk-driver: Xt ≡ Π0→t (1.91)

Managed reinvestment strategies risk-driver: Xt ≡ lnVt (1.92)

Case study 1.29

Cumulative P&L (1.90)

ARPM - Advanced Risk and Portfolio Management - arpm.co This update: Mar-28-2017 - Last update

The “Checklist” > 1 Risk Drivers Identification > Strategies

Strategies risk drivers: cumulative P&L

• Market: n̄ = 308 stocks• Managed exposure strategy: systematic strategy, based on the

magnitude of n̄ = 308 size signals ssizen,t (35.17)• Cumulative P&L: evolves approximately like a random walk

ARPM - Advanced Risk and Portfolio Management - arpm.co This update: Mar-28-2017 - Last update