It is also worth noting that alpha models can (and often do) incorporate risk management concepts. Let’s assume that a quant is building a relative alpha strategy. A significant amount of work is required to match what “relative” means to the exposures he intends to take or hedge. Revisiting an earlier example, if the quant is building a relative alpha strategy to forecast equity returns, he might not believe he has a valid way to forecast the returns of the sectors to which these equities belong. In this case, the quant may design his bet structures so that he is making forecasts of stocks’ returns relative to their sectors’ returns, which means that he never has a bet on the direction of the sector itself, only on which stocks will outperform and which stocks will underperform the sector. This, in turn, helps