China’s $941 Billion Wealth Fund Cut Risk Parity Assets In Half Days Before Rout Worsened: Report

China’s $941 Billion Wealth Fund Cut Risk Parity Assets In Half Days Before Rout Worsened: Report

China has had it with risk parity, apparently. According to the ubiquitous "people with knowledge of the matter", the country's $941 billion wealth fund recently cut its RP exposure in half, which helped it "avoid some of the recent turmoil" across assets, Bloomberg said Wednesday. You'll recall that risk parity was the last domino to tip in what's been variously described as the biggest VaR shock (at least) since Lehman. Read more: ‘When Risk Parity Goes Wrong’ And The Coming ‘New Worl
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3 thoughts on “China’s $941 Billion Wealth Fund Cut Risk Parity Assets In Half Days Before Rout Worsened: Report

    1. The VIX is based on the implied premia of near term stock options. Since we just experienced a highly unusual two-day rally, option premia went up, or at least remained high, on both put and call options. So, yes, you can have upside volatility.

  1. Yes. But the correlations are starting to come down. That said there is plenty more volatility to come. Delta and Ford have been cut to junk by at least one rating agency. Corporate credit is still looking pretty grim- this time the knock on is going to be about fundamentals – the economy, credit and earnings. Forced liquidations will be receeding, replaced by fundamental pressure. Which force will win out? Better liqudiity or worse fundamentals? We shall see. And don’t discount the virus either. I am seeing a lot of financial writers opining on the outcome of this pandemic. The honest to god truth is that at some point we will have treatments and vaccines but who knows when? Many writers with no basis comment- only time will tell….

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