Research On The Allocation Of Large-scale Assets Based On The Risk Parity Model Of Maximum Drawdown

At present,China has entered a new historical stage,the economy grows steadily from a high base.At the same time,the external environment is undergoing profound changes,and financial markets face more unpredictable risks.In this context,the risks of investing in a single asset have increased significantly.There is a growing demand for broad-category asset allocation by investors.On the other hand,financial markets are maturing,financial instruments and asset classes are becoming more abundant.Investors have the conditions for broad asset allocation.More and more investors are concerned about how to control risks and gain benefits through broad-category asset allocation.First of all,based on the previous studies on asset allocation,risk measurement methods and risk parity model,we find that there are still some deficiencies and limitations in the traditional asset allocation model.Secondly,on the basis of previous studies,we use the maximum drawdown rate as a measure of risk,and we take risk parity as the guiding ideology.We construct risk parity model based on maximum drawdown from investors’ perspective.Thirdly,we identify stocks,interest rate bonds,credit bonds and bulk commodities as the major asset allocation objects constructing the broad-category asset portfolio based on the risk parity model based on maximum drawdown.We use matlab modeling to solve the problem,and we use historical data for back test.This model can control risks and gain benefits at the same time.Finally,we use the comparative analysis method to compare the equal weight investment model,the minimum variance model and the risk parity model based on maximum drawdown.We demonstrate the advantages of the risk parity model based on maximum drawdown from four perspective,including the perspective of weight distribution,the perspective of portfolio return,the perspective of risk contribution rate,and the perspective of performance evaluation index.The analysis results show that risk parity model based on maximum drawdown,as an asset allocation model for risk management from the perspective of investors fits the investment logic of investors and financial institutions applying to Chinese market.Moreover,this model has excellent performance in risk control,and its comprehensive performance is better than the traditional minimum variance model and equal-weight model.The risk parity model based on maximum drawdown has certain guiding significance for broad-category asset allocation.