The following thesis, in collaboration with Professor Dennis Marco Montagna, Doctor Carlo Alberto Grecchi and Professor Sun Li has the purpose of treating, as a master’s thesis, the analysis of the All Weather portfolio and proposing an alternative approach to the classic Risk Parity theory. In order to carry out this analysis, it was fundamental the use of academic literature (and not) that allowed me to improve our understanding of the subject and deepen it. In the first chapter, in fact, are made theoretical insights on hedge funds in general and Bridgewater Associates in particular. What emerges from this first part is the very limited availability of information about hedge funds and, consequently, their products. In the second chapter, we have deepened the concept of Risk Parity in a very theoretical way in order to build a proxy of the behavior that an All Weather portfolio should have had in the last 20 years. The third chapter is the part of empirical analysis and application of the theory explained in the previous chapters in order to create Risk Parity portfolios that could be as close as possible to an All Weather portfolio. In addition, we decided to carry out a small comparison with the only other Risk Parity Benchmarks that can be found in today’s financial market. In the fourth (and last) chapter we propose an alternative to the Risk Parity approach previously studied in order to obtain a portfolio both more dynamic and more efficient in terms of reward per unit of risk.
Il seguente scritto, in collaborazione con il Professor Dennis Marco Montagna, il Dottor Carlo Alberto Grecchi e la Professoressa Sun Li ha lo scopo di trattare, come tesi di laurea magistrale, l’analisi del portafoglio All Weather e di proporre un approccio alternativo alla classica teoria della Risk Parity. Al fine di porre in atto questa analisi fondamentale è stato l’utilizzo della letteratura accademica (e non) che ha ha consentito di migliroare la comprensione dell’argomento e di approfondirlo in maniera molto importante. Nel primo capitolo, infatti, vengono fatti degli approfondimenti teorici con oggetto gli hedge funds in generale e Bridgewater Associates in particolare. Ciò che emerge da questa prima parte è la pochissima disponibilità di informazioni circa gli hedge funds e, di conseguenza, i loro prodotti infatti, nel secondo capitolo abbiamo approfondito il concetto di Risk Parity in maniera molto teorica per poter andare a costruire un proxy di quello che sarebbe dovuto essere un portafoglio All Weather. Il terzo capitolo rappresenta la parte di analisi empirica e applicazione della teoria spiegata nel capitolo precedente per creare dei portafogli Risk Parity che potessero avvicinarsi il più possibile a un portafoglio All Weather. Inoltre, abbiamo deciso di svolgere anche un piccolo confronto con gli unici altri prodotti Risk Parity presenti sul mercato finanziario ad oggi. Nel quarto (e ultimo) capitolo proponiamo una nostra alternativa all’approccio Risk Parity studiato precedentemente al fine di ottenere un portafoglio sia più dinamico che più efficiente in termini di ritorno per unità di rischio.
Enhancement of Risk Parity for the All Weather portfolio
FAVINI, ANDREA
2021/2022
Abstract
The following thesis, in collaboration with Professor Dennis Marco Montagna, Doctor Carlo Alberto Grecchi and Professor Sun Li has the purpose of treating, as a master’s thesis, the analysis of the All Weather portfolio and proposing an alternative approach to the classic Risk Parity theory. In order to carry out this analysis, it was fundamental the use of academic literature (and not) that allowed me to improve our understanding of the subject and deepen it. In the first chapter, in fact, are made theoretical insights on hedge funds in general and Bridgewater Associates in particular. What emerges from this first part is the very limited availability of information about hedge funds and, consequently, their products. In the second chapter, we have deepened the concept of Risk Parity in a very theoretical way in order to build a proxy of the behavior that an All Weather portfolio should have had in the last 20 years. The third chapter is the part of empirical analysis and application of the theory explained in the previous chapters in order to create Risk Parity portfolios that could be as close as possible to an All Weather portfolio. In addition, we decided to carry out a small comparison with the only other Risk Parity Benchmarks that can be found in today’s financial market. In the fourth (and last) chapter we propose an alternative to the Risk Parity approach previously studied in order to obtain a portfolio both more dynamic and more efficient in terms of reward per unit of risk.È consentito all'utente scaricare e condividere i documenti disponibili a testo pieno in UNITESI UNIPV nel rispetto della licenza Creative Commons del tipo CC BY NC ND.
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https://hdl.handle.net/20.500.14239/2589