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Advances in Analysis
AAN > Volume 5, Number 1, October 2020

Measuring Risks in a Portfolio of Financial Assets using the Downside Risk Method

Download PDF  (532.3 KB)PP. 1-15,  Pub. Date:October 7, 2020
DOI: 10.22606/aan.2020.51001

Author(s)
Ngongo Isidore Séraphin, Jimbo Henri Claver, Dongfack Saufack Arnaud, Dongmo Tsamo Arthur, Nkague Nkamba Léontine, Andjiga Gabriel Nicolas, Etoua Rémy Magloire
Affiliation(s)
Department of Mathematics, ENS, University of Yaoundé I, Cameroon
Department of Mathematics, ENS, University of Yaoundé I, Cameroon; Department of Applied Mathematics and Statistics, AUAF & Waseda University, Tokyo, Japan
Department of Mathematics, University of Yaoundé 1, Cameroon
Department of Mathematics, University of Yaoundé 1, Cameroon
Department of Mathematics, ENS, University of Yaoundé I, Cameroon
Department of Mathematics, University of Yaoundé 1, Cameroon
Department of Mathematics, Higher National Polytechnic School. Yaoundé 1, Cameroon
Abstract
Measuring risks in a portfolio of financial assets is a very high profile issue in financial mathematics research. In this article, we focus on the search for an efficient portfolio and a smooth efficient frontier using the Downside Risk method measured by the Semi-Variance to have a portfolio with minimal variance. More specifically, and considering a set of financial securities, we compare the Markowitz Mean-Variance method and the Downside Risk method. We find that Downside Risk is a better measure of risk than Mean-Variance and is therefore more suitable for building a portfolio of minimum variance.
Keywords
downside risk, average variance, efficient portfolio, efficient frontier, risk
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