Numerical study of risk management models

Pao Yue-kong Library Electronic Theses Database

Numerical study of risk management models

 

Author: Cheng, Hei-tung
Title: Numerical study of risk management models
Degree: M.Sc.
Year: 2002
Subject: Hong Kong Polytechnic University -- Dissertations
Risk management
Department: Multi-disciplinary Studies
Dept. of Applied Mathematics
Pages: iii, 64 leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1615451
URI: http://theses.lib.polyu.edu.hk/handle/200/292
Abstract: The purpose of this project is to pursue a numerical study of various models for risk management. More specifically, we use the computing software package, Matlab, to do numerical testings for the following risk management models: (i)L2 model in Markowitz(1952); (ii)L1 model in Konno and Yamazaki (1991); (iii) Minimax model in Young (1998); and (iv)L8, model in Cai et al (2000). The data from the Stock Exchange of Hong Kong will be used and the results will be compared. Three different investment periods are considered, they are short-term (one month), mid-term (six month) and long-term (one year). Besides, different tends of market(rising, normal and falling) are also investigated to see whether they affect the performances of each model. Finally, sensitivity tests are conducted by using different number of historical data in calculating the mean return rates for each model and each case. It is found that the L2 model is the most conservative model in most cases. L8, L1 and Minimax models are relatively more fluctuated. Besides, an increase in value generally causes a decrease in the number of assets in the optimal portfolio. For different term investments, the long-term investment performs better in rising and normal cases while short-term and mid-term are better in falling case. In the sensitivity test, an increase in the number of historical data in calculating the mean return rates gives no significant benefit in the actual returns.

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