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Risk Profiling and Portfolio Optimisationwith Prospect Theory
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Entrepreneurship and innovation.
2012 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Riskprofilering och Portföljoptimeringmed Prospect Theory (Swedish)
Abstract [sv]

Uppsatsens syfte är att undersöka hur det går att ta fram en portföljoptimeringsalgoritm som kan justeras efter individens riskpreferenser. Metoden skall även klara av icke-linjära tillgångsslag, exempelvis strukturerade produkter. För att inhämta individens riskpreferenser skapades ett frågeformulär som fokuserade på att bestämma faktorerna risk aversion, förlust aversion och klientens referenspunkt. Utifrån resultatet från frågeformuläret passas klienten in i en matris, vilket är den riskprofil som passar kundens preferenser. För att finna den optimala allokeringen för de olika riskprofilerna användes en kvadratisk värdefunktion. Denna värdefunktion blev vald som metod eftersom att den kunde både ta hänsyn till kundens riskprofil samt hantera ickelinjära tillgångsslag.

Abstract [en]

The purpose of this thesis is to investigate how to create a portfolio optimisation algorithm that can be adjusted after the individuals’ risk preference. This method should also be able to handle nonlinear asset classes, e.g. structured products. To be able to capture the ndividuals’ risk preferences a risk questionnaire was designed, which focused on determining the factors of risk aversion, loss aversion, and the clients’ reference point. From the results of the questionnaire the client is fitted into a matrix, i.e. the risk profile that fits the clients’ preferences. To find the optimal allocation for these risk profiles the quadratic value function was used. This value function was found to be the portfolio algorithm that could take into account both the clients’ risk profile and to handle non-linear asset classes.

Place, publisher, year, edition, pages
2012. , 76 p.
Keyword [en]
Risk profiling, portfolio optimisation, prospect theory, structured products.
Keyword [sv]
Riskprofilering, portföljoptimering, prospect theory, strukturerade produkter.
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-144293OAI: oai:DiVA.org:kth-144293DiVA: diva2:712771
Supervisors
Examiners
Available from: 2014-04-16 Created: 2014-04-16 Last updated: 2014-04-16Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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  • asciidoc
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