Absolute Risk Tolerance and Relative Risk Tolerance

[sam226]

Hi guys, since there are relative risk tolerance and absolute risk tolerance for B&H, constant mis and CPPI strategy, please confirm if my understanding on the relationship between the respective risk tolerance to wealth is correct or not:
1) Buy and Hold: Absolute Risk Tolerance directly increase with wealth and Relative Risk Tolerance directly increase with wealth;
2) Constant Mix: Absolute Risk Tolerance directly increase with wealth and Relative Risk Tolerance is constant with wealth;
3) CPPI: Absolute Risk Tolerance directly increase with wealth and Relative Risk Tolerance directly increase with wealth
Thanks.

 

[satuross]

sounds correct.
just remember the breaking point “higher Relative Risk Tolerance” for CPPI doesnt hold anymore

 

[Bilal]

now that’s something new ..

 

[sam226]

Hi satuross, why would you say the “higher Relative Risk Tolerance” for CPPI doesnt hold anymore? Thanks