THE QUANT PRIMER 02 | THE SHAPE OF RISK

Volatility, leverage and the conditions that remove choice

Risk becomes easier to discuss after it has been compressed into a number.

In the quant world there are many metrics to compare: A portfolio runs at twelve percent volatility. The position contributes forty basis points of daily value-at-risk. The systematic fund targets a ten percent annualized standard deviation.

These figures are useful because they a…