Risk & Portfolio Management
5 terms
Tactical Asset Allocation
Risk & Portfolio Management
%
Short-term deviations from a strategic allocation, intended to exploit expected differences in asset class returns.
Test: actual weights differ from strategic targets by a bounded amount, with a stated basis and a horizon for reverting
Tail Risk
Risk & Portfolio Management
qualitative
The risk of rare, extreme outcomes that sit far in the tails of the return distribution.
Test: outcomes beyond three standard deviations occur far more often than a normal distribution would imply
Time Horizon
Risk & Portfolio Management
years
The period before an investor needs to draw on the money invested.
Test: the date at which the capital, or a stated portion of it, must be available for spending
Tracking Error
Risk & Portfolio Management
%
The standard deviation of the difference between a portfolio's returns and its benchmark's.
Tracking Error = Standard Deviation of (Portfolio Return - Benchmark Return) over the period
Treynor Ratio
Risk & Portfolio Management
ratio (x, times)
Return above the risk-free rate per unit of systematic risk, measured by beta.
Treynor Ratio = (Portfolio Return - Risk-Free Rate) / Portfolio Beta