Abstract:
Standard risk metrics overlook or average away the impact of extreme events. To evelop and maintain viable investment strategies, Olsen expands the concept or risk-budgeting to allow for drawdowns and to forestall the suddenly fatal effects of margin requirements. This article promotes the combined application of the Calmar Ratio and a new metric devised by Olsen: ExposureFactor (the cost—in terms of leveraged risk capital—required to earn an average annualized return of 1%). The focus here is on strategic engineering of leverage to reduce risk and realize excess return. Included are critiques of some current risk metrics and an explanation of Olsen’s proprietary risk-reducing investment methodology…
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October 30th, 2008 | Investment, News | RSS feed
Yes interesting look at the world.