In Defence of Cyclical Coordinate Descent for Computing Risk Parity Portfolios
5 Pages Posted: 25 Jan 2021
Date Written: January 8, 2021
In this note, we review the conclusions of a paper comparing a cyclical coordinate descent (CCD) algorithm with other algorithms for solving risk parity portfolio optimization problems. In particular, we show that a proper numerical implementation of the CCD algorithm is fast, robust and convergent, confirming that the CCD algorithm is one of the most efficient algorithms to solve risk parity portfolio optimization problems.
Keywords: Risk Parity, Risk Budgeting, Portfolio Optimization, Cyclical Coordinate Descent Algorithm
JEL Classification: G11, C60
Suggested Citation: Suggested Citation