About this question
Hard · portfolio_optimization · Quant Researcher interview question · hrp, hierarchical_risk_parity, portfolio_optimization, clustering, inverse_variance
Hierarchical Risk Parity (HRP) is a modern portfolio construction method that addresses the instability of traditional mean-variance optimization. It uses hierarchical clustering to group assets based on their correlation structure, then recursively allocates capital using an inverse-variance approach. This process avoids inverting the often ill-conditioned covariance matrix, making it a robust technique in quantitative finance for asset allocation. Task Implement the function hrp_weights(retur