How can investors hedge against the growing list of risks?

Investors today are facing a growing list of risks. These include market risk, liquidity risk, macroeconomic risk, manager selection risk and many more. All of these can turn into the right opportunities if understood properly. This compendium is a primer of contemporary risks facing global allocators – designed to help you get better investment results.

A Portfolio Risk-Return Enhancer Via Maximum Drawdowns (PGIM Real Estate)

Private real estate can enhance a portfolio’s diversification. Here is what investors need to know about this asset class in the context of a risk-return assessment.

The Importance of Getting Paid Back For Risk Taken (BlackRock)

For compliance reasons, this paper is only accessible in the United States

Investing means taking risk. However, it is important for allocators to take on risks which eventually pay off.

Climate Risk Impacts on a Lending Portfolio (Moody’s Analytics)

A loan level analysis is the only way a lender can come to understand both the full portfolio impact and the heterogeneity within its loan portfolios.

Risk Retention in the European Securitization Market (ECB)

This paper investigates the impact of the different European regulatory risk retention methods on the credit ratings and pricing of securitization tranches at the time of issuance.

A Model for Bond Risk Premia and the Macroeconomy (Macrosynergy Research)

This paper shows that business cycle variations are critical to explaining excess bond returns, but they are not uncovered by standard factor models.

Hedging Permanent Income Shocks (Netspar)

This paper models the joint distribution of labour income shocks and stock returns allowing for a latent aggregate shock driving both.

Trust Deficit and Risk-free Investments! (Aswath Damodaran)

The place to start a discussion of risk-free rates is by answering the question of what allocators need for an investment to be risk-free.

Arbitrage and Risk-Taking in Derivatives (The Review of Asset Pricing Studies)

Classic option pricing theory values a derivative contract via dynamic delta hedging and treating the contract as redundant relative to the underlying security.

How ETFs Have Become Portfolio Building Blocks (State Street)

ETFs can provide broad or targeted exposure to a range of asset classes, such as equities, bonds, commodities and real estate, allowing investors to diversify their portfolios.

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