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Economic Analysis: Theory and Practice
 

Optimization of investment portfolio as part of practical implementation of a risk-based approach: A variety of methods and principles

Vol. 15, Iss. 10, OCTOBER 2016

PDF  Article PDF Version

Received: 27 June 2016

Received in revised form: 27 July 2016

Accepted: 17 August 2016

Available online: 1 November 2016

Subject Heading: INVESTMENT ANALYSIS

JEL Classification: C02, G11, O22

Pages: 79-92

Balynin I.V. Financial University under Government of Russian Federation, Moscow, Russian Federation
igorbalynin@mail.ru

Importance Under existing economic problems and decisions to build innovative economy and carry out import substitution programs, it is crucial to maximize efforts on creating and implementing investment projects in various economic activities, in particular in the context of risk-based approach to mitigate the risk of contingent losses.
Methods The study employs the integrated approach, methods of analysis and synthesis, principles of consistency and objectivity. I used Microsoft Excel software when considering the practical application of methods for building the optimal investment portfolio.
Results The paper describes basic principles, objectives and stages of investment portfolio optimization, provides a unique classification of methods to implement the optimization, an algorithm and procedure for using the methods on case studies, highlights problems caused by unreasonable diversification.
Conclusions and Relevance It is important to optimize investment portfolio in the context of practical implementation of risk-based approach, which implies numerous approaches and methods. However, the success of the optimization depends on strict adherence to basic principles, algorithms that are described and presented in the article, and accurate calculations. The findings may be useful for corporations, investment funds, credit institutions, insurance companies to make specific decisions during the investment portfolio optimization and to evaluate the efficiency and performance of investment projects, and for higher and secondary specialized educational institutions in their educational process.

Keywords: investment portfolio, investment project, optimization

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