Drawdown Risk Budgeting
Giovanni Fulci, FRM
A Thought...
As investment professional with 15 years of buy-side experience, I noted a long-standing gap in the financial industry related to practical implementation of a structured Drawdown Risk Budgeting framework for building and risk managing portfolios.
This gap is related to the absence of closed form/parametric ways of relating the portfolio non-normal drawdown risk with the risk characteristics of its constituents.
Building portfolios by explicitly focusing on drawdown dimensions is of paramount practical importance, because it is possible to obtain portfolios:
- less exposed to drawdown risk, and
- with better risk-adjusted performance
than the ubiquitous variance-covariance portfolios and their variations.
Based on my research, listed below, I’ve developed a new Drawdown Risk Budgeting Framework.
If you want more information on my research and achievements, contact me.
Giovanni Fulci, FRM
Conferences, Research and Publications
2015 "L’Ascesa e il Declino degli Hedge Funds" [The Rise and Fall of Hedge Funds], Speaker - SDA Bocconi/iShares Conference, 25 May 2015, SDA Bocconi, Milan
2015 – Panelist – 5° Forum Nazionale sulla Consulenza Finanziaria – Workshop: "I Consulenti Finanziari incontrano i Gestori", [5th National Forum on Financial Advisory – Workshop: "Financial Advisors meet Portfolio Managers"], Ascosim, Milan, 22 April 2015
2015 "Multi-Asset Allocation With Drawdown Risk Budgeting" [Why Risk Allocation In The Drawdown Dimension Is Superior To Standard Risk Budgeting For Portfolio Construction?], Speaker - Alphascope Conference, 3 Feb 2015 InterContinental, Geneva, Switzerland
2014 "Un Portafoglio di Errori Sistematici" [A Portfolio of Systematic Errors (i.e., a multi-asset liquid absolute return portfolio built on systematic errors of investors) ] , Speaker - Conference "Behavioural Finance", Magis Finance and University of Siena
2013 "New Risk-Based Approach for Enhanced Indexing and Multi-Asset Portfolio Construction", unpublished Working Paper, 50 pages (available on a NDA basis)
2004-2010 and 2013 "Active Management: dimensions, quantitative techniques, challenges", Two-day lectures - Master in Banking and Finance (IX e XI edizione), Faculty of Economics, La Sapienza University, Rome
2005, 2007 and 2011 "Active Management, Enhanced Indexing and Portable Alpha", One-day lectures - Master in Economic and Banking (MEBS), University of Siena
2010 "A Risk Contribution Approach to Asset Allocation", The IUP Journal of Financial Risk Management, March-June 2010, pp.58-77.
2009 "Asset Allocation e Risk Diversification: un Ossimoro?" [Asset Allocation and Risk Diversification: An Oxymoron?]; article published in the book "Scritti in onore di Tancredi Bianchi", Bancaria Editrice, pp.421-443.
2008 "A Risk Contribution Approach to Asset Allocation", working paper, second draft, December 2008
2007 "Risk Parity Portfolios", Speaker - Conference "Market and Credit Risks: Models and Governance" organized by " La Sapienza " University and STAT-Pro, Rome
2005 "Relative–Conditional Drawdown at Risk: Rationales and Applications", Speaker - Conference "Performance Attribution in Managed Portfolios", jointly organized by the University of Bicocca, Quantitative Methods Department (Milan) and the AIAF (Italian Association of Financial Analysts), Milan
2005 "Risk Perception and Bootstrap Conditional Drawdown-at-Risk", Speaker - AIFIRM national conference (Italian Association of Financial Risk Management), Milan
2004 "Time-diversification and Hedge Funds", Speaker - ABI Conference (Italian Banking Association) "Total Return e Absolute Return", Milan
1999-2003 Responsible for writing a weekly article on the international fixed income market for "Borsa e Finanza", an Italian economic weekly newspaper.
2003 "Option pricing, path-dependence and tracking error", Speaker - AIFIRM national conference
2002 "Capitale bancario per i rischi di mercato, paradosso dello scaling factor ed incentive-compatibility: una soluzione innovativa" [Banking capital for market risks, scaling factor paradox and incentive-compatibility: an innovative solution], Working paper, published in the AIFIRM Newsletter 2/2003
1999 "Extreme Value Theory e Value-at-Risk" and related implementation on an equity portfolio. Working paper. Excerpt published in the AIFIRM Newsletter 9/1999