  We discuss when and why custom multi-factor risk models are warranted and
give source code for computing some risk factors. Pension/mutual funds do not
require customization but standardization. However, using standardized risk
models in quant trading with much shorter holding horizons is suboptimal: 1)
longer horizon risk factors (value, growth, etc.) increase noise trades and
trading costs; 2) arbitrary risk factors can neutralize alpha; 3)
"standardized" industries are artificial and insufficiently granular; 4)
normalization of style risk factors is lost for the trading universe; 5)
diversifying risk models lowers P&L correlations, reduces turnover and market
impact, and increases capacity. We discuss various aspects of custom risk model
building.
