STOCK AND STRUCTURED WARRANT PORTFOLIO OPTIMIZATION USING STOCHASTIC VOLATILITY

• Main Author: Henry Prasetya, Matthew
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/75210
• Institution: Institut Teknologi Bandung

Individual and institutional stock market investor perform a poor risk management. They buy stocks without considering the downside risk. Therefore, this research will use quantitative simulation to help investor in their investment decision that is suitable with their expected return and risk appetite. This research use Markowitz principle for stock portfolio optimization. One of the methods that are used for optimization is Maximum Utility. In Maximum Utility, various coefficient of risk aversion is used to see the return of investment from different risk appetite. Simulation of stock portfolio will use data of the 10 largest stocks in Sucorinvest Equity Fund holding on 28 April 2023 as a benchmark. Besides that, this research will use structured warrant on a different portfolio. Structured warrant is a new product established by Indonesian Stock Exchange in September 2022. Stochastic volatility will be used to obtain the fair value of the structured warrant as a part of the portfolio optimization. The return of the simulation output outperforms the mutual fund benchmark. Meanwhile, structured warrant portfolio using real price occurred decline of 54%. However, simulation return would be fantastic if fair price is used in the simulation for call dan put structured warrant.