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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 7: Financial Markets and Risk Management II

AKSOE 7.2: Talk

Tuesday, March 28, 2006, 14:30–15:00, BAR 205

Mathematical method for quantitative evaluation of the equity portfolio market risk — •Zhdanova Tatiana — tatiana.zhdanova@accenture.com

We discuss a mathematical method for quantitative evaluation of the equity portfolio market risk in a Bank. We implement developed mathematical model in the automated subsystem RC&M to provide estimation of the maximum permissible looses for the equities portfolio on the regular basis as a one of the risk management procedures. We use VaR (Value-at-Risk) characteristic to evaluate quantitatively the market risk. We perform the advantages of the developed method relative to the other existing VaR estimation methods. The developed method allows getting more accurate estimation of loses then parametric methods (which are based on profit distribution function parameterization) and the information about each portfolio component weight is performed in difference with the nonparametric methods (these methods use approximation assumptions). An effective risk management system provides the financial company’s stability and optimization of capital usage and investing.