Changjiang Securities(SZ:000783) Changjiang Securities·2025-07-31 01:03Quantitative Models and Construction Methods 1. Model Name: General Risk Parity Model - Model Construction Idea: The risk parity model aims to equalize the risk contribution of each asset in the portfolio. When assets are uncorrelated, the risk parity allocation is equivalent to inverse volatility weighting, where higher volatility assets receive lower weights[18]. - Model Construction Process: - The risk contribution of each asset is calculated to ensure equal risk allocation. - Formula: $ w_i = \frac{1}{\sigma_i} $, where $ w_i $ is the weight of asset $ i $ and $ \sigma_i $ is the volatility of asset $ i $[18]. - Model Evaluation: This model is effective in balancing risk across assets, particularly when asset correlations are low[18]. 2. Model Name: Adjusted Risk Budget Model - Model Construction Idea: Adjust the risk budget based on the number of assets and their characteristics. The risk budget multiplier is proportional to the square root of the number of assets[29]. - Model Construction Process: - Static risk budgets are assigned to assets, with equity risk budget set at 25 and commodity/gold risk budgets at 36. - Dynamic adjustments are made using the Sharpe ratio over the past six months, with the maximum budget set at 1.5 times the static budget[36]. - Model Evaluation: The dynamic adjustment improves the model's responsiveness to market conditions, enhancing performance metrics like Sharpe ratio and reducing drawdowns[36]. 3. Model Name: Macro Risk Parity Model - Model Construction Idea: Incorporate macroeconomic factors into the risk parity framework to refine asset allocation based on macro factor correlations[38]. - Model Construction Process: - Decompose macro factor returns and calculate their correlations. - Formula: $ w_i = \frac{1}{\sigma_i} \times \text{Macro Factor Adjustment} $, where macro factor adjustment accounts for the correlation between macro factors and asset returns[38]. - Model Evaluation: This model enhances returns by aligning asset allocation with macroeconomic conditions, while maintaining risk parity principles[38]. 4. Model Name: Risk Budget Timing Model - Model Construction Idea: Adjust risk budgets dynamically based on asset timing signals, such as Sharpe ratios and macroeconomic states[59]. - Model Construction Process: - Fixed-income assets maintain a constant risk budget of 1. - Equity assets are adjusted based on a 1-month Sharpe ratio threshold of 0.5, with budgets increased to 64 if exceeded. - Convertible bonds are adjusted similarly with a threshold of 0.6 and a budget of 36. - Macro timing multiplies equity risk budgets by 4 during favorable conditions and reduces them by 4 during unfavorable conditions[59]. - Model Evaluation: This model significantly improves returns and reduces drawdowns by incorporating timing signals into risk budget adjustments[60]. --- Model Backtesting Results General Risk Parity Model - Annualized Return: 6.47% - Maximum Drawdown: -2.84% - Volatility: 2.79% - Sharpe Ratio: 2.25 - Monthly Win Rate: 74.76% - Monthly Profit-Loss Ratio: 6.14[55] Adjusted Risk Budget Model - Annualized Return: 7.99% - Maximum Drawdown: -4.01% - Volatility: 3.79% - Sharpe Ratio: 2.03 - Monthly Win Rate: 71.84% - Monthly Profit-Loss Ratio: 4.26[55] Risk Budget Timing Model - Annualized Return: 9.11% - Maximum Drawdown: -3.64% - Volatility: 3.62% - Sharpe Ratio: 2.41 - Monthly Win Rate: 71.84% - Monthly Profit-Loss Ratio: 5.50[61] --- Quantitative Factors and Construction Methods 1. Factor Name: Sharpe Ratio Adjustment - Factor Construction Idea: Use the Sharpe ratio as a timing signal to adjust risk budgets dynamically[59]. - Factor Construction Process: - Calculate the 1-month Sharpe ratio for each asset. - Compare the Sharpe ratio to predefined thresholds (e.g., 0.5 for equity, 0.6 for convertible bonds). - Adjust risk budgets based on whether the Sharpe ratio exceeds the threshold[59]. 2. Factor Name: Macro Timing Signal - Factor Construction Idea: Use macroeconomic states to determine equity allocation adjustments[59]. - Factor Construction Process: - Identify macroeconomic states using predefined signals. - Multiply equity risk budgets by 4 during favorable states and divide by 4 during unfavorable states[59]. --- Factor Backtesting Results Sharpe Ratio Adjustment Factor - Equity Risk Budget: Increased to 64 if Sharpe ratio exceeds 0.5[59] - Convertible Bond Risk Budget: Increased to 36 if Sharpe ratio exceeds 0.6[59] Macro Timing Signal Factor - Equity Risk Budget: Multiplied by 4 during favorable macro states, divided by 4 during unfavorable states[59]