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Delivery Date: 9th MAY 2017

Name: Lina Maria Pea Prieto
Financial Management

The right strategy

The instability in the economy, the involvement of external factors, the various
policies created by the rulers of the countries, the variability in the price of the
currency, the crisis of United States and need to have the domain in the stock
market, pitting Ray, Bob, Greg Jensen, Dan Bernstein among others of Bridgewater,
to find a way to create an investment strategy that structured could be indifferent to
changes in the economy which would make it possible that they had control of the
economy of the world and their investments, would not be affected at the time of
offer shares on the market. Apparently, Ray, Bob, Greg Jensen, Dan Bernstein
among others of Bridgewater with the strategy created about the risk parity achieved
control of the economy, now nothing measured them and they have the machine to
print tickets, then now they never will fail and the bonds they have in the market or
emit are risk-free.

After several studies, take part as evaluators of risk in different companies, taking
into account factors such as inflation, liabilities, assets, portfolio management,
quantitative methods, among others, risk management identified three fundamental
elements such as the profitability of cash, excessive market profitability and tilt,
which concluiria in Return = effective alpha beta but would be this the only thing to
keep in mind to be immune to the risk?. This gives home to the verification of the
strategy known as the parity of risk, which consists in the allocation of assets has
become increasingly popular after the global financial crisis.

In this case we can consider that the reason behind the risk parity is intuitive and
noble - at least for believers, this according to the above by the CFA Institute.
It is considered as intuitive. Given that the founder of Bridgewater Associates, Ray
Dalio, "laid the groundwork" risk parity strategy of investment in developing All
Weather. The idea for All Weather is simple: different economic scenarios pose risks
to different classes of assets throughout the economic cycle. Dalio and his team
identified four major risk scenarios and ensured that at least one part of the portfolio's
ability to withstand every risk. So here is where the All Weather is similar to the risk
parity: instead of orienting the optimal risk and return in the traditional setting of the
optimization of the portfolio, both strategies strive for contributions of risk balanced
of all kinds of assets.

It is considered that the strategy is noble, because it is the final program of

diversification. The "efficient" traditional portfolios tend to generate more risk of
actions. Enthusiasts argue that only the risk parity portfolios are truly diversified
Delivery Date: 9th MAY 2017
Name: Lina Maria Pea Prieto
Financial Management

because they are equally sensitive to fluctuations in any asset of risk. This seems
to make perfect sense, even though it may seem intuitive, this inference is not
backed by any research in particular.

In my opinion by the Ray group, this duly justified and allowed give security to their
investments and disappear the uncertainty of risk in the stock market, however, I
would add that a factor that can also be decisive in its strategy is the leverage as
exposed Cliff Asness and his associates, arguing that an essential element of the
strategies of risk parity is leverage.