Mathematical Sciences Department Virtual Financial Seminar: Rodrigo Targino, Getulio Vargas Foundation

Title: Trading perfect Risk Budgeting for portfolio returns

Abstract: The Markowitz portfolio problem aims to find the portfolio weights that maximize the expected return while minimizing the portfolio volatility. Risk budgeting is a portfolio strategy where each asset contributes a prespecified amount to the aggregate risk of the portfolio. In this work, we propose new optimization models that induce a compromise between these two strategies, and in particular allow to relax the strict risk budget allocation to achieve higher expected portfolio returns.