Optimal Portfolio Risk Analysis Using the Monte Carlo Method

https://doi.org/10.47194/orics.v4i4.276

Authors

  • Ramadhina Hardiva Kahar Undergrad Program in Mathematics, Faculty of Mathematics and Sciences, Universitas Padjadjaran
  • Nandira Putri Kaerudin Undergrad Program in Mathematics, Faculty of Mathematics and Sciences, Universitas Padjadjaran
  • Willen Vimelia Undergrad Program in Mathematics, Faculty of Mathematics and Sciences, Universitas Padjadjaran

Keywords:

Risk analysis, Monte Carlo, Optimal Portfolio

Abstract

Investment is an activity carried out with the expectation of gaining profits in the future through the management of investment assets. Investment assets can include buildings, gold, and stocks. Investment activities are inseparable from the concepts of return and risk. The relationship between the expected rate of return and the level of risk is linear. However, risk can be avoided or reduced through portfolio diversification. Evaluating investment risk is crucial for investors to determine which risky assets to choose. One popular method for assessing the risk of a portfolio is using Value at Risk (VaR). In VaR calculations, Monte Carlo is considered the most effective method. In this paper, a risk analysis of the optimal portfolio is conducted using the Monte Carlo method. The analyzed optimal portfolio consists of shares in BBCA, TLKM, BBRI, BBNI, BMRI, ADRO, GGRM, and UNTR. The results indicate that the potential loss for the investor is no more than IDR 705.634,- with an initial fund of 1 billion. 

References

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Published

2023-12-30

How to Cite

Kahar, R. H., Kaerudin, N. P., & Vimelia, W. (2023). Optimal Portfolio Risk Analysis Using the Monte Carlo Method. Operations Research: International Conference Series, 4(4), 163–167. https://doi.org/10.47194/orics.v4i4.276

Issue

Vol. 4 No. 4 (2023): Operations Research International Conference Series (ORICS), December 2023

Section

Articles
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