Risk metrics method and computer algorithms designed to achieve VaR

摘要

The article firstly analyzes the Markowitz''s Mean-Variance Model, with The Monte Carlo method achieving the computer simulation of efficient frontier. Against the shortage of the model, this test allows short selling, using the Zero-Utility to optimize the objective, and improving the model with chance constraints, then using the Risk Metrics way to design the VaR algorithm, realized by computer. Finally, the paper provides a practical example, implementing the practical application of the algorithm. What''s more, this study proves that “the high risk, the high payoff” is a character of risk investment. It shows the result is more practical which is optimized by Utility Function. By comparing, we find that the risk aversion coefficient has big influence on the economic benefits of the investors. We can say, VaR provides a powerful basis for the effective selection of investment combination and the assessment of risk and value.