CreatingYour Own Portfolio And Value At Risk

CreatingYour Own Portfolio And Value At Risk

You could make our own portfolio and invest in the market wisely. The maximum return portfolio is formed by using some weight combinations that a portfolio can be made that offers maximum returns. The risk, however, will be higher for this portfolio.

Multiple portfolios

You could also make some multiple portfolios. For a certain amount of risk or portfolio variance, you can create at least two sets of portfolios. One of these portfolios will give you the highest return that is possible and the other portfolio will yield the lowest possible return.

You could create many such portfolios with different types of risk profiles. For a fixed risk amount there could be many kinds of combinations of portfolios. Within these combinations, you could make one that offers the highest return and one that generates the minimum return.


There have been some events that have happened in the financial market that caused many repercussions. The financial regulators were concerned about stocks affecting the system and the capability of the firm to assess their risks. The financial firms could be evaluating their own survival in the case of any catastrophic event that could shake the financial system. This is something that is not just theoretical; the Black Monday of October 1987 is a clear proof of this phenomenon.

Financial firms take up some speculative trading positions across the continents and across many asset class, counterparties, and asset classes. This is indeed a task that is painstaking but the business needs this. The firm needs to know how much they may lose in case of a repeat of the financial crisis.

These are the traders or also risk managers and they are known as quants. They monitor their positions in the market and evaluate their risk in the live market and in real time using some mathematical models that are complicated and sophisticated. They come with subject knowledge of mathematics, economics, statistics, and physics. They also hold a degree in the traditional finance.

Firms recognized the importance of having risk management systems in place and this formed an important part of their hierarchy. The risk management team is now present in all the financial firms and they work towards assessing the cause of the risk.

The financial firms presented a combined risk of the level of the firm. The report generated by the automated trading robot highlighted the value at risk or VaR.