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Stability
of Beta: An Empirical Investigation into Indian Stock Market
--Jonali Sarma and Pranita Sarmah
The
concept of risk management in case of investment decision
assumes paramount importance in modern day financial management.
Though risk cannot be completely eliminated, it can be reduced
by taking precautionary measures. The risk involved in investment
is categorized in two components: systematic risk and unsystematic
risk. The comparison of the volatility to the market as
a whole is termed as systematic risk. Beta is used to measure
the systematic risk associated with the investment. Beta
is a way of telling how volatile a stock is, compared with
the rest of the market. The stability of beta is of great
concern as it is a very important tool for almost all investment
decisions and plays a significant role in risk measurement
and risk management.
©
2008 IUP . All Rights Reserved.
An
Analysis of Operational Risk of Banks: Catastrophe Modeling
--Gabor
Benedek and Daniel Homolya
Owing
to modern regulations and company internal considerations,
financial institutions pay increasingly careful attention
to their risks. The systematic management of operational
risks is a relatively recent development. Operational risk
is the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external
events. This paper analyzes operational risk with the help
of a simulation model framework developed by the authors.
Our approach is based on the analysis of latent risk processes
rather than manifest risk processes, which is a highly popular
method in risk literature. The latent risk process is modeled
by a stochastic risk process, the so-called Ornstein-Uhlenbeck
process, with mean-reversion characteristics.
©
2008 Gabor Benedek and Daniel Homolya. All Rights Reserved.
Protective
Put Strategy in the Indian Stock Market: An Empirical Study
--P
A K Preetham, Subramanian S and U S
Rao
A
survey conducted by Eurex (Major European exchange for derivatives)
and Financial News on the use of derivatives in the European
fund industry reveals that the general trend points to an
increase in the use of options in the professional portfolio
management among institutional investors. During volatile
markets, investors tend to favor value-safeguarding investment
products. Index-based option strategies, such as protective
put strategy, are especially suitable for this purpose.
An index-based option strategy combines a passive equity
index investment with an options portfolio, which is also
passively managed. Other empirical studies also have demonstrated
that such strategies achieve a risk-return ratio that is
significantly more attractive than that of the underlying
security.
©
2008 IUP . All Rights Reserved.
Joint
Interest Rate Risk Management of Balance Sheet and Hedge
Portfolio in a Present Value Perspective
--Simone
Farinelli and Paolo Vanini
We
present a multi-period mean-variance optimization program,
which allows for a joint optimization of the balance and
off-balance sheet. Our first finding is the proof of a conjecture
of Li and Ng (2000) and Leippold et al., (2003 and 2004)
about the equivalence of the original non-separable mean-variance
problem and its embedding into a higher dimensional separable
problem. We further prove that given a time independent
term structure, the one-period and the multi-period problem
are equivalent. If the best forecast of the interest rates
is the forward rate, we show that it is then optimal to
mimic the benchmark strategy.
©
2008 IUP . All Rights Reserved.
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