Group Members

Arsalan Nawaz [8079]

Farhan Ali [9796]

Risk Management
Group Final Project

Topic 1: Risk Management for Portfolio

Supervisor: Sir Abdul Salam Sheikh

Table of Contents
Introduction......................................................................................................................................2
Risk Profile and Investment Objective............................................................................................2
Markets Selected and Justification..................................................................................................2
Risks Associated with each Markets Selected.................................................................................2

Stock Market................................................................................................................................2
Commodity Market......................................................................................................................2

Returns Generated with each Market Selected................................................................................2

Stock Market................................................................................................................................2
Commodity Market......................................................................................................................2

Derivative Instrument in Markets....................................................................................................2

In stock Market of Pakistan and World.......................................................................................2

In Commodity Market of Pakistan and World............................................................................2

Portfolio Optimization and Portfolio Development........................................................................2

Hedging Techniques........................................................................................................................2
Risk Management Techniques for Portfolio....................................................................................2
Future Prices and Comparison with Actual Results........................................................................2
Conclusion and Recommendations..................................................................................................2
Introduction
The purpose of this report is to invest according to the return and risk associated with the market,
Risks to capital and profits are identified, assessed, and controlled through risk management
procedure. Financial uncertainties, legal obligations, technical challenges, strategic management
failures, accidents, and natural disasters are all potential causes of risk. So, we have to assess the
risk according to market factors and we should have maximum return on our investment with
minimum risk. We have selected stock market and commodity market for our project, the
investment of 100 million was disturbed among these two market with proper risk analysis and
return ratio. Stock market is consider valuable market which can maximize, protect, and build
your investment and commodity market is can provide investors with diversification, hedge
against inflation, and excess positive return. However, these markets have their own risk’s, in
this project we will discuss those risk and invest our 100 million accordingly.
Risk Profile and Investment Objective
[Risk profile types i.e. risk taking, risk averse, risk neutral etc. State what group members risk
behaviour is (risk taking) and develop investment objective accordingly].
Markets Selected and Justification
[Including graphs for showing historical performance, justify as per risk profile as well].
Risks Associated with each Markets Selected
Stock Market
These are the risk that associated with stock market
 Volatility
Share prices are unpredictable, and they might drop substantially, even to zero.
 Credit Risk
Ordinary shareholders are typically the last in line of creditors if a firm collapses, and
there may be no way to recover any money.
 Unexpected Events
 Unexpected occurrences beyond your influence, such as negative news about your firm, a
change in government policy, or a natural or man-made calamity, can have a significant
impact on stock values.
Commodity Market
Commodity market risk refers to the uncertainties of future market values and of the size of the
future income, caused by the fluctuation in the prices of commodities.[1] These commodities may
be grains, metals, gas, electricity etc. A commodity enterprise needs to deal with the following
kinds of risks:

 Price risk is arising out of adverse movements in the world prices, exchange rates,
basis between local and world prices. The related price area risk usually has a rather
minor impact.
 Quantity or volume risk
 Cost risk (Input price risk)
 Political risk

Returns Generated with each Market Selected

Stock Market
Commodity Market
Derivative Instrument in Markets
In stock Market of Pakistan and World
In Commodity Market of Pakistan and World
Portfolio Optimization and Portfolio Development
Hedging Techniques
Risk Management Techniques for Portfolio
Future Prices and Comparison with Actual Results
Conclusion and Recommendations