Risk & Portfolio Management
3 terms
Diversification
Risk & Portfolio Management
qualitative
Spreading investments across assets whose returns do not move together, so that the portfolio's volatility falls below the average of its parts.
Portfolio Variance = Sum over all pairs of (Weight i x Weight j x Covariance of i and j)
Downside Risk
Risk & Portfolio Management
%
The dispersion of returns below a target level, ignoring variation above it.
Downside Deviation = square root of the average of squared shortfalls below the target return
Drawdown
Risk & Portfolio Management
%
The decline in a portfolio's value from a previous peak to a subsequent trough, expressed as a percentage.
Drawdown = (Peak Value - Current Value) / Peak Value x 100