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

Intermediate

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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True

**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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Keywords:

risk model

APT model

Arbitrage Pricing Theory

forecasting risk

coverage universe

forecast variance

covariance

factors

securities

fundamental factor

macroeconomic

statistical

risk

risk analysis

portfolo optimization