# Risk Budgeting

*Risk & Portfolio — Finicade finance glossary*

Deciding in advance how much risk each desk, strategy or asset is allowed to consume, then allocating within that limit. It treats risk as a scarce resource to be spent where it earns the most.

**Related terms:** [VaR Decomposition](https://finicade.com/glossary/var-decomposition), [Economic Capital](https://finicade.com/glossary/economic-capital), [Diversification](https://finicade.com/glossary/diversification)

**Taught in:** Risk Arena — Risk Budgeting & RAROC

Source: https://finicade.com/glossary/risk-budgeting