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Risk model definition

In the chasm between retail and institutional shops sits a hidden tool unavailable to most due to cost, awareness and complexity.


Risk model is a model for forecasting risk for each security in the coverage universe. Risk models include forecasts of variance for each securiy and the covariance between each pair of securities, or factors. Risk models are used for risk analysis and portfolio optimization. The three versions of third-party risk models include: fundamental factor, macroeconomic and statistical.

Synonyms: Arbitrage Pricing Theory model, APT model

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A fundamental factor risk model normally has fewer cells than a historical model of individual stocks. | True or False?


In a Sentence

Tim:  Have you heard what we spend on Ann's risk model  every year?
Kay:  Nope. It's a closely guarded secret, and you know what that means.


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~/ home  / finance  / glossary  / risk model

risk model
APT model
Arbitrage Pricing Theory
forecasting risk
coverage universe
forecast variance
fundamental factor
risk analysis
portfolo optimization