+7 925 966 4690, 9am6pm (GMT+3), Monday – Friday
ИД «Финансы и кредит»

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Economic Analysis: Theory and Practice
 

Portfolio optimization based on Value at Risk as a measure of risk

Vol. 14, Iss. 35, SEPTEMBER 2015

PDF  Article PDF Version

Received: 21 May 2015

Accepted: 8 July 2015

Available online: 7 October 2015

Subject Heading: MATHEMATICAL METHODS AND MODELS

JEL Classification: 

Pages: 54-64

Kolyasnikova E.R. Bashkir State University, Ufa, Republic of Bashkortostan, Russian Federation
len82@yandex.ru

Gelemyanova D.A. Bashkir State University, Ufa, Republic of Bashkortostan, Russian Federation
gelemyanovadiana@mail.ru

Importance When building an investment portfolio, investors often make decisions under uncertainty and risk. The article considers the formation and optimization of parametric securities portfolio based on Value at Risk as a measure of risk, and reviews the existing techniques.
     Objectives The study's objective is to develop a model to create an optimal portfolio in the stock market.
     Methods We employed statistical and portfolio analyses and optimization methods. We processed the statistical information in MS Excel and STATISTICA 10, and implemented optimization problems in MS Excel.
     Results We offer a three-step model of optimal portfolio based on the following risk measures: Value at Risk, standard deviation, and semi-deviation. We have conducted a computational experiment implementing the proposed model, taking into account the real data of the securities market. The article includes recommendations for investor on how to build an optimal portfolio.
     Conclusions and Relevance We have built a portfolio under the proposed three-step model. The model enables to make recommendations to investors on optimal allocation of funds. The work is intended for a wide range of economists, bankers, analysts, investors working in financial markets and wishing to create an optimal portfolio of financial instruments.

Keywords: Value at Risk (VaR), securities portfolio, optimal portfolio, semi-deviation, standard deviation

References:

  1. Danielsson J., De Vries C.G., Jørgensen B.N. The Value of Value at Risk: Statistical, Financial, and Regulatory Considerations. FRBNY Economic Policy Review, 1998, October, pp. 107–108.
  2. Men'shikov I.S., Shelagin D.A. Rynochnye riski: modeli i metody [Market risks: models and methods]. Moscow, Computing Center of RAS Publ., 2006, 55 p.
  3. Demkin I.V. Otsenka integrirovannogo innovatsionnogo riska na osnove metodologii Value At Risk [Assessing the integrated innovation risk under the Value at Risk methodology]. Problemy analiza riska = Problems of Risk Analysis, 2006, no. 4, pp. 362–378.
  4. Tkachenko T.S. Ispol'zovanie metodov imitatsionnogo modelirovaniya v otsenke valyutnogo riska [Using the simulation modeling techniques to evaluate foreign exchange risk]. Region: ekonomika i sotsiologiya = Region: Economics and Sociology, 2007, no. 2, pp. 80–89.
  5. Ufimtsev A.A. Izmerenie valyutnykh riskov s pomoshch'yu metodologii Value at Risk [Currency risk measurement under the Value at Risk methodology]. Vestnik Chelyabinskogo gosudarstvennogo universiteta = Bulletin of Chelyabinsk State University, 2012, no. 8, pp. 137–142.
  6. Nikonov O.I., Firsov A.A. Regressionnaya model' fondovogo rynka v kommercheskom banke na osnove GARCH-protsessa dlya dvukh vremennykh ryadov [The regression model of the stock market in a commercial bank based on the GARCH-process for two time-series]. Vestnik UGTU = Bulletin of USTU, 2007, no. 4, pp. 70–75.
  7. Kadnikov A.A. VaR portfelya, soderzhashchego instrumenty s korotkoi istoriei torgov [VaR of the portfolio containing tools with a short history of trading]. Vestnik Novosibirskogo gosudarstvennogo universiteta. Ser.: Sotsial'no-ekonomicheskie nauki = Bulletin of Novosibirsk State University. Series: Socio-Economic Sciences, 2009, vol. 9, no. 3, pp. 39–52.
  8. Khoreva O.A. Ispol'zovanie metodologii VaR pri izmerenii kontragentnogo riska dlya forvardnykh frakhtovykh soglashenii [Using the VaR-methodology in measuring the counterparty risk in forward freight contracts]. Izvestiya Sankt-Peterburgskogo universiteta ekonomiki i finansov = Bulletin of Saint Petersburg State University of Economics, 2009, no. 2, pp. 169–170.
  9. Lobanov A., Porokh A. Analiz primenimosti razlichnykh modelei rascheta VaR na rossiiskom rynke aktsii [Analysis of the applicability of different models of VaR calculation in the Russian equity market]. Rynok tsennykh bumag = Securities Market, 2001, no. 2, pp. 65–70.
  10. Kainova E.A., Lobanov A.A. Sravnitel'nyi analiz metodov rascheta VaR limitov s uchetom model'nogo riska na primere rossiiskogo rynka aktsii [A comparative analysis of methods for VaR limits calculation taking into account the model risk (the case of the Russian stock market)]. Upravlenie finansovymi riskami = Financial Risk Management, 2005, no. 1, pp. 44–55.
  11. Kolyasnikova E.R., Skorospelova N.A. Formirovanie portfelya na finansovom rynke. Algoritm, metodika, modeli [Building a portfolio in the financial market. Algorithm, methodology, model]. Saarbrücken, LAP Lambert Academic Publishing, 2013, 80 p.
  12. Kolyasnikova E.R., Skorospelova N.A. Formirovanie portfelya s uchetom razlichnykh mer riska [Building a portfolio based on various risk measures]. Upravlenie finansovymi riskami = Financial Risk Management, 2013, no. 3, pp. 204–220.
  13. Bronshtein E.M., Shaposhnikova A.G. Problemy investirovaniya [Problems of investment]. Audit i finansovyi analiz = Audit and Financial Analysis, 2010, no. 5, pp. 1–5.
  14. Markowitz H. Portfolio Selection: Efficient Diversification of Investments. New York, John Wiley & Sons, Inc., London, Chapman & Hall, Limited, 1959, 344 p.
  15. Lobanov A. Problema metoda pri raschete Value at Risk [A problem of the method for Value at Risk calculation]. Rynok tsennykh bumag = Securities Market, 2000, no. 21, pp. 54–58.
  16. Liang B., Park H. Risk Measures for Hedge Funds: A Cross-Sectional Approach. European Financial Management, 2007, no. 13, pp. 333–370.
  17. Garp P.J. Financial risk manager handbook. New Jersey, John Wiley & Sons, 2007, 714 p.

View all articles of issue

 

ISSN 2311-8725 (Online)
ISSN 2073-039X (Print)

Journal current issue

Vol. 23, Iss. 3
March 2024

Archive