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Lecture 34

Risk-Constrained Portfolio Optimization

Introduction

Once you have a model that is predicting returns, and you’ve determined that these returns are novel alpha and not just common risk, the next step is constructing a portfolio. In any investment process, you want to optimize your returns given some risk budget/tolerances. We’ll use Quantopian's risk model to measure estimated risk exposures of given portfolios, and then show you how to construct an optimal portfolio that obeys given risk tolerances.

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