DEFINITION of 'TreynorBlack Model'
A type of asset allocation model that was developed by Jack Treynor and Fischer Black. The model tries to determine the optimal combination of passively and actively managed assets in an investment portfolio.When determining the optimal allocation of assets, the model focuses primarily on securities' systematic and unsystematic risk.
Next Up
BREAKING DOWN 'TreynorBlack Model'
If using the TreynorBlack model, an individual can see that the model focuses less on the Beta of a security and more on its unsystematic risk. The more unsystematic risk a security has, the less weight it is given in the TreynorBlack model. As a result of this tendency, the TreynorBlack model is said to favor lowreturn, lowrisk securities over those with higher return and higher risk.
RELATED TERMS

Model Risk
A type of risk that occurs when a financial model used to measure ... 
Unsystematic Risk
Company or industry specific risk that is inherent in each investment. ... 
Stochastic Modeling
A method of financial modeling in which one or more variables ... 
MultiFactor Model
A financial model that employs multiple factors in its computations ... 
Hullâ€“White Model
A singlefactor interest model used to price derivatives. The ... 
Fed Model
A model thought to be used by the Federal Reserve that hypothesizes ...
Related Articles

Small Business
What is a Business Model?
Business model is the term for a companyâ€™s plan as to how it will earn revenue. 
Investing
What is Unsystematic Risk?
Unsystematic risk is the part of an investmentâ€™s risk that is attributable to the investment itself â€” not to the entire economic system. 
Investing
How To Manage Portfolio Risk
Follow these tips to successfully manage portfolio risk. 
Investing
Understanding Financial Models
A financial model is a representation of some aspects of a firm or given security. It uses historical numbers to create calculations that inform financial recommendations or predict future financial ... 
Small Business
Calculating (Small) Company Credit Risk
Determining creditworthiness of smaller and mediumsized corporations isn't as easy as for larger companies, but these tips can help. 
Managing Wealth
Naive Diversification Vs. Optimization
Informed, logical diversification is just as effective as optimizing models. Find out why. 
Investing
Financial Models You Can Create With Excel
The relatively modest amount of time it takes to build these models can pay for itself by leading you to better investment decisions. 
Small Business
Getting To Know Business Models
Learning how to assess business models helps investors identify companies that are the best investments. 
Managing Wealth
One Portfolio For Asset Allocation
If you treat all of your investments as a single portfolio, you will be better able to maximize returns. 
Financial Advisor
Which Asset Allocation is Best for Clients?
Modern Portfolio Theory is showing its age. So which asset allocation model is best?
RELATED FAQS

How can a company reduce the unsystematic risk of its own security issues?
Understand the basic concepts of systematic and unsystematic risk, and learn steps a company can take to reduce its level ... Read Answer >> 
Why do some investors believe that unsystematic risk is not relevant?
Read about a stock market theory that suggests that unsystematic risks are rendered irrelevant through widespread portfolio ... Read Answer >> 
What are some common examples of unsystematic risk?
Learn about how to identify examples of unsystematic risk, and discover how many can be traced to entrepreneurial error or ... Read Answer >> 
What is the average return on equity for a company in the electronics sector?
Learn about the BlackScholes option pricing model and the binomial options model, and understand the advantages of the binomial ... Read Answer >> 
How can I use asset allocation to properly diversify my portfolio?
Understand how asset allocation works, and learn how you can use asset allocation to diversify your investment portfolio ... Read Answer >> 
What is the difference between financial forecasting and financial modelling?
Understand the difference between financial forecasting and financial modeling, and learn why a company should conduct both ... Read Answer >>