Volatility & Risk Budgets by Hand: Rolling and Exponentially Weighted Volatility, a GARCH(1,1) Recursion, Volatility Targeting, Inverse-Volatility Weights & Risk Parity
Measure risk the way it actually behaves – in calm and stormy spells. You will compare rolling and exponentially weighted volatility, run a GARCH(1,1) recursion with given parameters and forecast it forward, scale a position to a volatility target, split risk between assets with inverse-volatility weights, compute each asset's risk contribution and find an equal-risk mix on a weight grid, with every cell checked as you go.
One-time payment · lifetime access · lessons, labs, exam and certificate included · no subscription.
About this course
This course measures and budgets risk step by step in a spreadsheet, using a fictional savings club. You square 150 daily returns, build rolling 20- and 60-day volatility with relative ranges and annualise it with SQRT(252). You run the exponentially weighted variance for three given λ values, then a GARCH(1,1) recursion with given parameters, its persistence and long-run level. You compare three parameter sets by log-likelihood with LN and PI, forecast the variance path and a volatility term structure, scale exposure to a volatility target with a cap, split portfolio risk into contributions and find an equal-risk mix on a weight grid with MINIFS. All numbers are fictional and for learning only, not investment advice.
Lessons
- Calm and Stormy Spells: Squared Returns and Rolling Volatility Pro
- Exponentially Weighted Volatility: Three λ Values and a Shock Pro
- GARCH(1,1) by Hand: Recursion, Persistence and the Long-Run Level Pro
- Which Parameters Fit Better? Log-Likelihood Without an Optimiser Pro
- Forecasting Volatility: The Path Back to the Long-Run Level Pro
- Volatility Targeting: Scaling Exposure to a Risk Budget Pro
- Inverse-Volatility Weights and Risk Contributions Pro
- Capstone – Equal Risk Contribution on a Weight Grid Pro