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APPLICATION OF DISCRETE TIME MODELS IN THE FORMATION OF INVESTMENT PORTFOLIO


Kinds of risks of financial institutions. The characteristics of mono- and periodnoyi binomial market models for determining the optimal investment portfolio based on risk.

The existence of risky asset portfolio helps reduce its profitability and increase the existing level of risk (albeit all negative effects are offset by revenues from the risk-free asset). That is, in period t = 0 value of the portfolio generated a positive though (3/11), but it is formed by a high proportion of risk-free asset (20/ 33). Obviously, it is necessary to overhaul the portfolio with the inclusion of another risky asset, which has a higher yield .Therefore, we have considered models give a clear picture of the effectiveness of investment resources to invest without risk assets and ways to reduce the existing level of risk and an optimal portfolio. In particular, mono- periodna model by mathematical transformations allows to find the interval of interest rates (r), within which there is a real risk of investing resources in risky assets. However, if this is not included in the rate specified interval - it says there is no risk in carrying out any of the data assets. According to the existing level of risk asset portfolio (risk and without risk) is formed for the purpose of hedging risk, ie when the transactions of risky assets applicability of the results expected forecasts, financial institutions, in a portfolio composed of these assets does not bear losses. As for the binomial model, it is a visible demonstration of price changes over time. That price changes under the influence of various factors only in well-defined limits (or increases under the influence of favorable factors or decreases in all other cases) with a certain probability (usually likelihood based on forecasts of experts, or even used option changes the probabilities (ie ½ for growth and to reduce ½). Considering the binomial model, be aware that the price in period T (the existence of several discrete periods) can be formed in several different ways. practice, when determining the final price of a large number of periods in the binomial model building model random distribution (with pre -defined constraints) using a software like Scilab and Matlab.



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Keywords:  financial institutions’ risks, mono-period market model, binominal market model

FINANCIAL INSTRUMENTS

Polishchuk Yevheniia
doctoral investment banking department

Kruk Volodymyr
PhD, Senior Lecturer investment banking department

Vorotnikova Alona
Undergraduates Ecole Internationale des Sciences du Traitement de l’Information (EISTI, France)

 

 

 

 

 

 

 

 

 

 

 

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