Title page for ETD etd-0430104-155045

Document Type thesis

Author Name Liu, Guochun

URN etd-0430104-155045

Title Value at Risk Models for a Nonlinear Hedged Portfolio

Degree MS

Department Mathematical Sciences

Advisors
Domokos Vermes, Advisor
Bogdan Vernescu, Department Head

Keywords
Hedging
Value at Risk
Risk Measure
Risk Management

Date of Presentation/Defense 2004-04-30

Availability unrestricted

Abstract
This thesis addresses some practical issues that are similar to what a risk manager would be facing. To protect portfolio against unexpected turbulent drop, risk managers might use options to hedge the portfolio. Since the price of an option is not a linear function of the price of the underlying security or index, consequently option hedged portfolio’s value is a not linear combination of the market prices of the underlying securities,
Three Value-at-Risk (VaR) models, traditional estimate based Monte Carlo model, GARCH based Monte Carlo model, and resampling model, are developed to estimate risk of non-linear portfolios. The results from the models by setting different levels of hedging strategies are useful to evaluate and compare these strategies, and therefore may assist risk managers in making practical decisions in risk management.

Files
guochunliu.pdf

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Document Type	thesis
Author Name	Liu, Guochun
URN	etd-0430104-155045
Title	Value at Risk Models for a Nonlinear Hedged Portfolio
Degree	MS
Department	Mathematical Sciences
Advisors	Domokos Vermes, Advisor Bogdan Vernescu, Department Head
Keywords	Hedging Value at Risk Risk Measure Risk Management
Date of Presentation/Defense	2004-04-30
Availability	unrestricted
Abstract This thesis addresses some practical issues that are similar to what a risk manager would be facing. To protect portfolio against unexpected turbulent drop, risk managers might use options to hedge the portfolio. Since the price of an option is not a linear function of the price of the underlying security or index, consequently option hedged portfolio’s value is a not linear combination of the market prices of the underlying securities, Three Value-at-Risk (VaR) models, traditional estimate based Monte Carlo model, GARCH based Monte Carlo model, and resampling model, are developed to estimate risk of non-linear portfolios. The results from the models by setting different levels of hedging strategies are useful to evaluate and compare these strategies, and therefore may assist risk managers in making practical decisions in risk management.
Files	guochunliu.pdf