Post-Trade Rebalancing involves adjusting a crypto investment portfolio’s asset allocation after trades have been executed and settled, to restore target weights or align with predefined risk parameters. This process addresses deviations caused by market movements or previous trading activity, ensuring the portfolio maintains its intended risk-return profile. It is a critical component of ongoing portfolio management.
Mechanism
The operational mechanism typically involves portfolio management systems that monitor asset weights against target allocations and calculate the necessary adjustments. These systems generate new trade instructions based on predefined rebalancing rules, which are then routed for execution. Integration with settlement and custody platforms ensures that asset transfers and holdings accurately reflect the adjusted portfolio structure.
Methodology
The strategic methodology centers on systematic risk control and consistent adherence to an investment strategy. It includes establishing specific rebalancing triggers, such as threshold-based deviations or periodic reviews, to initiate adjustments. This approach helps manage concentration risk, captures profits from outperforming assets, and allocates capital efficiently across the portfolio, maintaining alignment with long-term investment objectives.
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