Dynamically Adjusting Risk Limits to a Reference Index

Dynamically Adjusting Risk Limits to a Reference Index

  • The model proposes a method to adjust risk limits to a reference index.
  • More specifically, the adjustment consists in adapting an equity exposure limit considering the volatility of a stock versus a reference index / benchmark. The higher the stock volatility versus the index, the lower the limit (and the lower the exposure to the stock allowed).
  • The model proposes an alternative to standard static limits, usually expressed in steps.

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Dynamically Adjusting Risk Limits to a R
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