HomeCFACFA Level 3CFA Level 3 – Equity Portfolio Management: Absolute Risk Attribution

CFA Level 3 – Equity Portfolio Management: Absolute Risk Attribution

  • May 22, 2020
  • Posted by: Fabian Moa, CFA, FRM, CTP, AFM, FMVA, FSA Credential
  • Categories: CFA, CFA Level 3
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CFA Level 3

Topic: Equity Portfolio Management

Reading: Active Equity Investing: Portfolio Construction

 

When you have a portfolio of n-assets, we use the absolute risk attribution to estimate the contribution of each asset to the portfolio variance. We use a 3-asset portfolio to illustrate the calculation of:

1) variance and covariance terms of each asset.
2) contribution of each asset to the total portfolio variance.
3) the %contribution of each asset to the total portfolio variance.
4) the portfolio standard deviation.

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