Risk Management in Asset Management
Investors are natural risk bearers, in part, due to the vast array of risk management tools available to them. These tools allow a risk budgeting process that de-couples the asset allocation and active bets taken in the portfolio. The risk of non-traded assets in the portfolio can be reduced by selective hedging and insurance products. Non-traded assets and a dynamic risk/return tradeoff lead to horizon specific asset allocation. Portfolios should be constructed to account for the systematic shifts in asset liquidity.
Gregory Connor, Robert Korajczyk
Connor, Gregory, and Robert Korajczyk. 2003. Risk Management in Asset Management.