PORTFOLIO OPTIMIZATION WITH EUROPE OPTION USING MATRIX ANALYSIS
In every investment, investors desire the highest possible return and the lowest possible risk. If the investment is in the form of a portfolio consisting of a collection of assets, then the role of matrix analysis is needed to model the problem into a matrix or vector. For risky assets (uncertai...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/65388 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | In every investment, investors desire the highest possible return and the lowest
possible risk. If the investment is in the form of a portfolio consisting of a collection
of assets, then the role of matrix analysis is needed to model the problem into a
matrix or vector. For risky assets (uncertain yield), it is assumed that the return (log)
in a period is normally distributed. The data used to estimate distribution parameters
can be in the form of real historical data from an asset or simulation of random
number generation from computer programming. The parameters to be estimated,
namely the mean and variance, are estimated using the moment and maximum
likelihood methods. In this final project, Markowitz optimization is studied which
utilizes the concept of matrix analysis to determine the optimal asset allocation.
Derivative financial instruments such as European options are added to the portfolio
so as to reduce investment risk. |
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