RT Journal Article SR Electronic T1 Implementing Optimal Risk Budgeting JF The Journal of Portfolio Management FD Institutional Investor Journals SP 73 OP 80 DO 10.3905/jpm.2001.319824 VO 28 IS 1 A1 Wai Lee A1 Daniel Y. Lam YR 2001 UL https://pm-research.com/content/28/1/73.abstract AB Risk budgeting has become a buzzword. While there may be no generally accepted definition or approaches for implementation, the underlying concept of risk budgeting remains sound and relevant. Defining risk as “uncertainty of alpha,” the authors argue that successful implementation of risk budgeting requires assessment of the quality of one's information under uncertainty (which the authors define as information risks), as well as other statistical risk measurement. Using a global asset allocation portfolio as an example, the authors introduce a simple optimal risk budgeting tool. With information risks, investment views, and total risk budget as inputs, the framework presented provides the optimal combination of information advantage so that the allocation of risks across strategies and assets is consistent with a manager's assessment of information risks and investment views.