An Introduction to Risk Parity
Risk contribution and its financial interpretation
Efficient portfolios through true diversification
Edward E. Qian, PhD, CFA, is the chief investment officer and head of research of the Multi Asset Group at PanAgora Asset Management. He was previously a postdoctoral researcher in astrophysics at the University of Leiden in the Netherlands, and a National Science Foundation Postdoctoral Mathematical Research Fellow at the Massachusetts Institute of Technology (MIT). Dr. Qian has made substantial contributions to risk parity investment strategies and quantitative equity portfolio management. He coined the term "risk parity" and pioneered the use of portfolio theory for evaluating alpha factors and constructing multifactor models. He is the coauthor of the highly praised Chapman & Hall/CRC book Quantitative Equity Portfolio Management: Modern Techniques and Applications. Dr. Qian earned a BS in mathematics from Peking University and a PhD in applied mathematics from Florida State University.
"Edward Qian has been a significant researcher and practitioner
in the area of risk parity, with his efforts extending further back
than before he coined the term `risk parity.' Risk Parity
Fundamentals should be on the bookshelf of anyone
considering or investing in multi-asset, risk-managed strategies
like risk parity, both as a cover-to-cover read and as a quick
-Michael Campbell, MBA, CAIA, Deputy Chief Investment Officer, Workplace Safety and Insurance Board (WSIB), Toronto, Canada
"Edward Qian's book is a must-read for both risk parity
investors and practitioners. For investors, it is the `buyer's
guide' of a financial product category with lots of buzz, but not
many structures. For practitioners, it is a DIY book written by a
leading practitioner and theorist. Skillfully illustrating complex
mathematical concepts through easy-to-understand analogies, Dr.
Qian makes his investment insights available to both quantitative
and non-quantitative oriented audiences. Dr. Qian carefully
examines many important debates regarding risk parity investing and
offers his insightful analyses. We can all learn something new from
Dr. Qian's writing."
-Ronald Hua, Managing Director, Goldman Sachs Asset Managements
"Dr. Edward Qian, the inventor of the term `risk parity,'
started to manage risk parity portfolios in 2006-long before the
strategy gained popularity in recent years. This book was based on
a collection of essays for investors that Dr. Qian wrote over the
years. With additional effort, Dr. Qian turned it into a
comprehensive framework on multi-asset investment, a ready-to-use
textbook for serious investors. As an investor and then a portfolio
manager of risk rarity strategy, I find Dr. Qian's book serves as a
great reference. It's a must-have for people who are interested in
asset allocation and multi-asset investing, with rigorous theory as
well as real money management considerations."
-Dr. Hua Fan, Senior Managing Director, Head of Fixed Income and Absolute Return Investment Department, China Investment Corp