Concentration risk Concentration risk

Concentration risk

  • Currently 4/5 Stars.
  • 1
  • 2
  • 3
  • 4
  • 5

Article Details

January 23, 2009
January 23, 2009
Would you like to...

Concentration risk explanation
Concentration risk arises because of increased exposure to one trading strategy or a group of correlated funds. Commonly, concentration risk is understood as exposure to a linked group of assets, for example, by location, by industry etc., while the actual correlation factor is ignored. When analyzing an individual hedge fund, concentration risk implies exposure to the underlying securities, while, for a FoHF, concentration refers to the strategy allocation. The primary reason to control concentration risk is to avoid an excessive correlation between assets or strategies. Therefore, a naive approach of addressing concentration risk by defining the strategy exposure limits is most questionable unless the underlying correlations are considered.
Article is in the following categories:
Quant KB » Risk Management

Quant KB » Due Diligence» Quantitative Due Diligence

Leave A Comment

or close

Email This Article

or close

Existing Comments

There are currently no comments.

Attachments Attachments

There are currently no files.

myNotes My Notes

You currently have no notes on this article. You can leave your own note on this page, the note can only be seen by you (and our administrators) but not other users.

You need to login first