# Volatility Targeting ⎊ Area ⎊ Resource 2

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## What is the Volatility of Volatility Targeting?

Volatility targeting is a risk management strategy that adjusts portfolio exposure to maintain a constant level of volatility. The strategy involves dynamically changing the allocation to risky assets based on real-time market volatility measurements. This approach aims to stabilize risk exposure over time, rather than allowing it to fluctuate with market conditions.

## What is the Adjustment of Volatility Targeting?

The core mechanism of volatility targeting involves adjusting the portfolio's leverage or asset allocation in response to changes in observed volatility. When volatility increases, the strategy reduces exposure to risky assets; conversely, when volatility decreases, exposure is increased. This adjustment process is automated to maintain the target risk level.

## What is the Risk of Volatility Targeting?

Volatility targeting provides a systematic method for managing risk by controlling the portfolio's overall volatility. By maintaining a consistent risk profile, the strategy aims to deliver more stable returns and reduce the impact of extreme market movements. This approach is particularly relevant in high-volatility markets like cryptocurrency derivatives.


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## [Cross-Margin Liquidation Cascades](https://term.greeks.live/definition/cross-margin-liquidation-cascades/)

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**Original URL:** https://term.greeks.live/area/volatility-targeting/resource/2/