>Magister Scientiae - MSc / In this thesis, we discuss methods for optimising the expected rate of return of a
portfolio with minimal risk. As part of the work we look at the Modern Portfolio
Theory which tries to maximise the portfolio's expected rate of return for a cer-
tain amount of risk. We also use Quadratic Programming to optimise portfolios.
Generally it is recognised that portfolios with a high expected return, carry higher
risk. The Modern Portfolio Theory assists when choosing portfolios with the lowest
possible risk. There is a nite number of assets in a portfolio and we therefore want
to allocate them in such a way that we're able to optimise the expected rate of
return with minimal risk. We also use the Markowian approach to allocate these
assets. The Capital Asset Pricing Model is also used, which will help us to reduce
our e cient portfolio to a single portfolio. Furthermore we use the Black-Litterman
model to try and optimise our portfolio with a view to understanding the current
market conditions, as well as considering how the market will perform in the future.
An additional tool we'll use is Value at Risk. This enables us to manage the market
risk. To this end, we follow the three basic approaches from Jorion [Value at Risk.
USA: McGraw-Hills, 2001]. The Value at Risk tool has become essential in calcu-
lating a portfolio's risk over the last decade. It works by monitoring algorithms in
order to nd the worst possible scenarios within the portfolio. We perform several
numerical experiments in MATLAB and Microsoft Excel and these are presented in
the thesis with the relevant descriptions.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uwc/oai:etd.uwc.ac.za:11394/3883 |
| Date | January 2013 |
| Creators | Seepi, Thoriso P.J. |
| Contributors | Patidar, Kailash C. |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Rights | University of Western Cape |
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