Determining the Optimal Portfolio in Iran Stock Exchange by Value at Risk Approach

Value at risk is a well-known concept in the measurement, prediction and management of risk which has received increasing attention in financial schemes. This method has been used in determining the optimum level of stocks of the investment portfolio. Value at risk minimization of the portfolio has been utilized to determine the optimal level of investment. Portfolio optimization aims to ascertain the optimal amount of assets so that the risk is minimized in a given level of return. The main objective of this study is introducing value at risk (VAR) as an appropriate pattern to manage the risk of the investments in Iran Stock Exchange and to select the optimal portfolio. Using parametric variance-covariance, the investment risk of a stock portfolio was calculated (selected through filtering technique). Finally, the optimal level of each stock in a portfolio was calculated by using a linear programming model. The findings reveal that there should be an investment in at least nine companies of the selected firms in which their stocks is determined

Return, Risk, Value at Risk, Diversification, Optimal Portfolio