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 ... 
Coefficient of Determination
A measure used in statistical model analysis to assess how well ... 
Financial Modeling
The process by which a firm constructs a financial representation ... 
Fed Model
A model thought to be used by the Federal Reserve that hypothesizes ... 
Hullâ€“White Model
A singlefactor interest model used to price derivatives. The ... 
Black's Model
A variation of the popular BlackScholes options pricing model ...
Related Articles

Investing Basics
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
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 ... 
Entrepreneurship
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. 
Fundamental Analysis
Naive Diversification Vs. Optimization
Informed, logical diversification is just as effective as optimizing models. Find out why. 
Forex Strategies
How To Build A Forex Trading Model
The forex market is volatile, but a forex trading model with clear, stepbystep rules based on a sound strategy can help decrease losing trades. 
Professionals
DCF Vs. Comparables: Which One To Use
DCF and Comparables models are widely used in equity valuation. We explain the pros and cons of each method. 
Professionals
The Best Financial Modeling Courses for Investment Bankers
Obtain information, both general and comparative, about the best available financial modeling courses for individuals pursuing a career in investment banking. 
Investing Basics
Asset Allocation Models: Comparing 3 Traditional Strategies
Learn about the three most common asset allocation models: conservative, moderate and aggressive. 
Investing
The Capital Asset Pricing (CAPM) Model: Pros and Cons
CAPM, while criticized for its unrealistic assumptions, provides a more useful outcome than either the DDM or WACC in many situations. 
Options & Futures
6 Asset Allocation Strategies That Work
Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right.
RELATED FAQS

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 ideal number of stocks to have in a portfolio?
First off, there is no single correct answer to this question  it will depend on a number of factors such as your country ... Read Answer >> 
How does systematic risk influence stock prices?
Understand how systematic risk can influence the prices of stocks and how strategic asset allocation can help reduce systemic ... Read Answer >> 
What is the breakdown of subjects covered on the Series 6 exam?
Learn about the riskreturn tradeoff for investing in stocks versus lowrisk Treasurys and bonds, and understand the types ... Read Answer >> 
How do subscription business models work?
Understand how a subscription business model works and why companies prefer a subscription business model over a traditional ... Read Answer >> 
What percentage of a diversified portfolio should be exposed to the insurance sector?
Learn how it is critical to innovate and improve financial models and techniques used in quantitative analysis, and understand ... Read Answer >>