Value-at-Risk (VaR ) is an industrial standard for monitoring market risk in an investment portfolio. It measures potential osses within a given confidence level. VaR was first used by major financial institutions in the early 1990’s, and widely developed after the release of J.P. Morgan’s Riskmetrics Technical Document in 1996. The efficient calculation, implementation, interpretation and optimization of VaR are a challenge in the practice of risk management when the number of market factors in the portfolio is high. In this thesis, we are concerned with the quadratic analytical estimation of VaR and we present a methodology for an approximation to VaR that is based on the principal components of a sensitivity-adjusted covariance matrix. The result is an explicit expression in terms of portfolio deltas, gammas, and the mean and covariance matrix. It can be viewed as a non-linear extension of the linear model given by the delta-normal-VaR of RiskMetrics, a standard calculation for the risk in the financial sector. We obtain an asymptotic expansion for VaR in the limit when the confidence level approaches 1 and precise estimates of the reminder. We then optimize the approximated VaR with respect to the gradient or delta of the portfolio, a quantity which can be changed by trading the underlying assets (stocks), without entering into any derivative transactions. This analysis provides an optimal trading strategy of the portfolio that minimizes the risk.

There is a growing trend to use public-private partnerships (PPP) for infrastructure project delivery due to lack of budget and inefficiency of public sector. The most popular PPP option is a concession-based type such as build-operate-transfer (BOT). However, construction delay, costs overrun, and disastrous financial performance in the early operation phase are not rarely seen in large BOT projects. The case of Taiwan High Speed Rail (THSR) is the evidence. The problem lies in over-optimism in financial feasibility analysis and under-estimation in risk exposure evaluation. Based on information of Case Project - Kaohsiung Intercontinental Terminal (KIT), which started its Phase One Plan in 2007 at a cost of about NT$42.89 billions in land procurement, peripheral public infrastructure and construction and facilities of the terminal, I will apply traditional capital investment methodology to evaluate its financial feasibility. This is done by calculating key financial indexes from Total Investment Point of View and Equity Point of View and determine whether this project is acceptable or not by conventional criteria from three main participants¡¦ position, including government agency, financial institutions, and private investors. However, we can not realize risk exposure of Case Project from traditional methods. Therefore, ideas of Value-at-Risk (VAR) that commonly used in evaluating risk exposure of financial assets are brought in. The VAR concepts are used in four financial indexes, including self-liquidation ratio (SLR), net present value (NPV), debt coverage ratio (DCR) and times interest earned (TIE), which are regarded as critical in decision by government agency, private investors, and financial institutions. This is done by applying Monte Carlo Simulation, which involves 1,000 iterations of sampling based on parameter settings of risk factors and consideration of correlations in risk factors. Volatility of key risk factor is analyzed to further realize comprehensively risk exposure in terms of VARs of financial indexes. Evidences show that, while parameter settings of risk factors are critical to simulations results, consideration of correlations of risk factors will also diverge results from that of ignoring. In addition, sensitivity analysis in terms of volatility in key risk factors presents full-scale financial risk exposure, which is helpful in reaching final decision. Of all three participants in Case Project, while private investors face greatest risk exposure due to high financial leverage employed, financial institutions confront relatively low risk in terms of loan repayment. From government agency¡¦s view, probability of fully self-liquidated with no subsidy in Case Project is 90%.

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St. Gallen, University, Diss., 2005.

Bachelor-Arbeit Univ. St. Gallen, 2005.

Bachelor-Arbeit Univ. St. Gallen, 2006.

Master-Arbeit Univ. St. Gallen, 2007.

Master-Arbeit Univ. St. Gallen, 2008.

Master-Arbeit Univ. St. Gallen, 2008.