Methodology

The complete methodology for the RiskModels hierarchical factor model is published and maintained on riskmodels.org, its canonical home.

That page is the full derivation: the L1/L2/L3 regression cascade, orthogonalization and link betas, Huber–Vasicek beta estimation, hedge-ratio construction, variance decomposition, the geometric return bridge, and the L* selection rule. It is kept in one place so it stays citable and downloadable as a PDF for model governance and allocator files, rather than drifting between two sites.

What stays in these docs

The methodology page explains why the numbers are what they are. For how to retrieve them and build with them, stay here:

• ERM3 Engine Design — the implementation assumptions: time-safe construction, Security Master discipline, and why the hedge outputs remain executable with raw ETFs.
• API Reference — the live decomposition and metrics endpoints, with wire field names and response schemas.
• API Docs — coverage, the endpoint map, pricing, and the main research workflow.

For the math behind the numbers those endpoints return, read the methodology on riskmodels.org.