A Detailed Presentation on elements of risk and measurements of risk with reference to security analysis & portfolio management

1. PRESENTATIONON ELEMENTS OF RISK &MEASUREMENT
OF RISK
(SECURITY ANALYSIS &PORTFOLIOMANAGEMET)
PRESENTED BY:- KURAPATI SAI PRIYANKA
REG.NO. 18491E0015
QISCET

2. Defining risk
Types of risk
Systematic risk
Un-systematic risk
Measurements of risk and return
Conclusion
References
CONTENTS
COVERED
UNDER THIS
TOPIC

11. MEASUREMENT OF RISK
A risk can be measured by as shown in the following problem:-
Suppose a share is currently selling at Rs.120/-. An investor who
is interested in the share anticipates that the company will pay a
dividend of Rs.5/- in the next year. Moreover he expects to sell
the shares at 175/- after one year. The expected return from
this return can be calculated as follows:
Expected Return=
Forecasted dividend + forecasted end of the period stock price
-1
initial investment
5+175 -1
120
R=50 % OR
0.05

12. CONTINUATION…..
Since the future is uncertain , the investor has to consider the
probability of several other possible returns.
Possible returns(in%) probability of occurrence
xi P(Xi)
30 0.10
40 0.30
50 0.40
60 0.10
70 0.10

13. CONTINUATION……
CALCULATION OF EXPECTED RETURN
Possible returns Probability Xi.P(Xi)
Xi P(Xi)
30 0.10 3.00
40 0.30 12.00
50 0.40 20.00
60 0.10 6.00
70 0.10 7.00
𝒊=𝟏
𝒏
𝑿𝒊. 𝒑 𝑿𝒊 = 48.00

14. CONTINUATION……
Calculation of expected risk
Possible probability Deviation Deviation square Product
Return Xi P(Xi). (xi − 𝑥) (xi − 𝑥)2 (xi − 𝑥)2.p(xi)
30 0.10 -18 324 32.4
40 0.30 -8 64 19.2
50 0.40 2 4 1.6
60 0.10 12 144 14.4
70 0.10 22 484 48.4
𝜎2 =116.0
Variance =116% ; Standard deviation = 116 = 10.77 %

15. CONCLUSION
From the topic finally ,I concluded as follows:
I observe that risk and return are the two related aspects and it also clearly shows
that HIGH investment refers HIGH gain & LOW investment refers LOW risk
HIGHRISK= MORE PROFIT/GAIN
LOW RISK= LESS PROFIT/GAIN

16. REFERENCES
 Arnaud Bervas (2006). "Market Liquidity and its
incorporation into Risk Management" (PDF). Financial
Stability Review. 8: 63–79. Archived from the
original (PDF) on July 12, 2012.
 ^ Glyn A. Holton (2013). "Value-at-Risk: Theory and
Practice, Second Edition". Retrieved July 2, 2013.
 ^ "Final Report of the Multidisciplinary Working Group on
Enhanced Disclosure". Bank for International
Settlements. April 2001. Retrieved August 8, 2012.
 ^ "Mr Greenspan discusses recent trends in the
management of foreign exchange reserves" (PDF). Bank
for International Settlements. April 29, 1999.
Retrieved August 8, 2012.
 ^ "Liquidity Risk Management" (PDF). Federal Deposit
Insurance Corporation. 2008. Retrieved August 8, 2012.