Risk Management

Risk mitigation is a key component to the LJM strategy. LJM maintains a disciplined approach to managing risks through the proactive and daily management of three core areas: portfolio construction, monitoring, and rebalancing.

LJM approaches risk by reducing risk tolerance levels for the most probabilistic scenarios. Sources of risk that have been identified are used to establish return targets and related risk controls such as risk tolerance targets.

We use three core sources to identify risk:

Global Macro Analysis

Event Risks

Economic Fundamentals

Central Bank/Government Risks in Various Scenarios

Core Market Analysis

Equity Index Levels

Related Option Volatility Surfaces

Transaction Flow

Portfolio Risk

Standard Option Risk Models with Proprietary Market Assumptions

Model Portfolio Risk on Multiple Time Frames

Short: 1 Day, Medium: 10 Days, Long: 90 Days

Because market behavior is not symmetrical, LJM engages in hedging techniques in response to downside risk. We have developed state-of-the-art technology that helps LJM identify risk-mitigating trades while having less impact on targeted returns. By using this real-time portfolio analysis and stress testing, we are able to rebalance based on exposure to market and volatility changes. This dynamic portfolio rebalancing is based on internal metrics that allow us to maintain prudent and consistent risk/reward profiles.