Risk budgets: Comment

In a previous issue, George Chow and Mark Kritzman discussed the relationsh ip of risk budgeting and asset allocation. A risk budget is defined as the conversion of optimal allocations from mean-variance optimization into valu e at risk assignments. This comment identifies an error in the formula for the sensitivity of portfolio value at risk with respect to asset weights. T he authors demonstrate how to derive VaR sensitivity correctly and extend t he analysis to more than three assets.