Risk Management

Benchmark Risk

Definition

What is Benchmark Risk?

The risk that managing too closely to or too far from a benchmark produces undesirable results.

Example in practice

A manager avoids a strong company because its benchmark weight is small.

Keep learning

An analysis of portfolio performance under severe but plausible scenarios.

The estimation of outcomes under a defined combination of assumptions.

The study of how an output changes when one input changes.

A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.

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