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EDHEC and Lyxor to explore risk parity strategies
08 October 2013
Three-year research project to probe risk allocation
risk parity strategy
EDHEC-Risk Institute and Lyxor have partnered to launch a
research chair exploring the future of risk parity investment
The research chair, 'Risk Allocation Solutions', will run for
three years and will seek to develop academic insights for the
"design of high-performance multi-asset investment solutions".
Professor Lionel Martellini, scientific director of EDHEC-Risk
Institute, said, "In the face of recent crises, asset
allocation decisions appear as the main source of added value
by the investment industry.
With the support of Lyxor Asset Management, we very much look
forward to advancing research in the different areas covered by
this new research chair and assessing the superiority in
various economic regimes of conditional risk parity strategies
with respect to standard static risk parity techniques."
The project's research team, led by EDHEC-Risk Institute's
Martellini, will comprise Vincent Milhau, EDHEC's deputy
scientific director, as well as Nicolas Gaussel, CIO of Lyxor
and Thierry Roncalli, Lyxor's head of quantitative research.
In the first year of the research project, the team will focus
on "the next generation of risk parity" and its weakness in so
far as its lack of explicit sensitivity to changes in economic
The project will look to develop a dynamic risk allocation
approach incorporating the extending of standard risk budgeting
techniques to time-varying equity and bond volatility levels;
extending standard risk budgeting techniques to downside risk
measures with an asymmetric response to decreases in bond yield
levels; and extending standard risk budgeting techniques to
mean-reverting risk premia for equity and bond markets.
Thierry Roncalli, head of quantitative research at Lyxor Asset
Management said, "The risk parity approach colours many of the
investment strategies on equities, bonds and multi-asset
classes in Lyxor.
"Extending the risk parity approach by taking into account
economic changes and the dynamics of risk premia is today a
challenge to better manage multi-asset portfolios."