Risk Budgeting Portfolios from simulations

07/29/2022, 5:10 PM5:20 PM UTC
JuMP

Abstract:

Risk budgeting is a portfolio strategy where each asset contributes a pre-specified amount to the total portfolio risk. We propose a numerical framework in JuMP that uses only simulations of returns for estimating risk budgeting portfolios, and provide a Sample Average Approximation algorithm. We leveraged automatic differentiation and JuMP's modeling flexibility to build a clear and concise code. We also report on memory issues encountered when solving for every day in a 14 year horizon.

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