Volatility Drives Equity Markets

How do pod shops manage risk: Part 2

In our last writeup, “How do pod shops manage risk”, we explored very intuitively and in decent detail factors, equity factor risk models, market neutrality and some of the optimization problems top market-neutral hedge funds face.

In this post, we will intuitively explain:

• Risk and volatility

• Total portfolio volatility

• Risk limits and thresholds (we mostly want idio volatility!)