The basic approaches to risk assessment in the stock market

Abstract

Purpose: the author reviews, analyzes and compares the main approaches to risk assessment of the securities portfolio in this work. Discussion: various authors have proposed a variety of options for risk assessment for securities portfolio to date. These options have both common features and significant differences. Both foreign and domestic scientists researched this issue. Risk and profitability of portfolio investments are invariably two key criteria when creating the securities portfolio at the same time. The potential return of individual assets included in the portfolio is characterized by random variables distributed according to the laws of normal (Gaussian) distribution. Results: the author reviewed, analyzed and compared methods of risk assessment for the securities portfolio «Value-at – Risk» (VaR), the results of P. Artzner and F. Delbine research, «Conditional Value at Risk» (CVaR), and «Conditional Drawdown-at-Risk» (CDaR). In addition to these methods, some well-known models of investment portfolio formation played an indelible role in risk management. These models include: the Tobin model; the model with the parameter τ (investor’s attitude to risk); the Sharpe model. Moreover, the author considered and compared the various ways to minimize risks in the stock market.