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    Risk Aversion Example

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    Shashwat Deshmukh
    The document contains information about 3 investments labeled A, B, and C including their expected returns, standard deviations, risk aversion coefficients, and utility values. It also includes a table showing the relationship between the weight, expected return, standard deviation, and risk aversion coefficient for a portfolio consisting of risky and risk-free assets. The document provides data on returns, risks, and weights that can be used to analyze the risk-return tradeoff of different investments and asset allocations.

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    Risk Aversion Example

    Uploaded by

    Shashwat Deshmukh
    12 views10 pages
    The document contains information about 3 investments labeled A, B, and C including their expected returns, standard deviations, risk aversion coefficients, and utility values. It also includes a table showing the relationship between the weight, expected return, standard deviation, and risk aversion coefficient for a portfolio consisting of risky and risk-free assets. The document provides data on returns, risks, and weights that can be used to analyze the risk-return tradeoff of different investments and asset allocations.

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    The document contains information about 3 investments labeled A, B, and C including their expected returns, standard deviations, risk aversion coefficients, and utility values. It also includes a table showing the relationship between the weight, expected return, standard deviation, and risk aversion coefficient for a portfolio consisting of risky and risk-free assets. The document provides data on returns, risks, and weights that can be used to analyze the risk-return tradeoff of different investments and asset allocations.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    12 views10 pages

    Risk Aversion Example

    Uploaded by

    Shashwat Deshmukh
    The document contains information about 3 investments labeled A, B, and C including their expected returns, standard deviations, risk aversion coefficients, and utility values. It also includes a table showing the relationship between the weight, expected return, standard deviation, and risk aversion coefficient for a portfolio consisting of risky and risk-free assets. The document provides data on returns, risks, and weights that can be used to analyze the risk-return tradeoff of different investments and asset allocations.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 10

    Investment Expected Return Standard Deviation Risk Av Co Utility V

    A 20% 15% 3 0.17


    B 13% 30% 3 -0.01
    C 23% 45% 3 -0.07

    Investment Expected Return Standard DeviatRisk Av Co Utility V


    A 20% 30% 1 0.16
    B 20% 30% 2 0.11
    C 20% 30% 3 0.07
    D 20% 30% 4 0.02
    E 20% 30% 5 -0.02
    20% 30% 6 -0.07
    1/2
    U  Er A2

    Utility Function
    0.2

    0.15
    Uti lity Functi on
    0.1

    0.05

    0
    R i s k A v Co 1 2 3 4
    -0.05

    -0.1
    Function

    y Functi on

    3 4 5 6
    Asset Class Sub Class Amount Weight
    Risk Free Assets Treasury Bills 90000 30%
    Bond 113400 38%
    Risky Asset Equity 96600 32%
    Total V alue of Porfolio 300000
    Within Risky Asset Class
    0.54
    210000 0.46
    Risk-free rate 7%

    Equity
    Expected return, E(r ) 15%
    Standard deviation, σ 22%

    Risky and Risk Free Asset


    25.00%

    20.00%

    15.00%

    10.00%

    5.00%

    0.00%
    0.0000 0.0500 0.1000 0.1500 0.2000 0.2500 0.3000 0.35

    Risky and Risk Free Asset


    weight_Equity weight_rf E[r] Variance Standard Deviation
    0 1 7.00% 0.0000 0.0000
    0.1 0.9 7.80% 0.0005 0.0220
    0.2 0.8 8.60% 0.0019 0.0440
    0.3 0.7 9.40% 0.0044 0.0660
    0.4 0.6 10.20% 0.0077 0.0880
    0.5 0.5 11.00% 0.0121 0.1100
    0.6 0.4 11.80% 0.0174 0.1320
    0.7 0.3 12.60% 0.0237 0.1540
    0.8 0.2 13.40% 0.0310 0.1760
    0.9 0.1 14.20% 0.0392 0.1980
    1 0 15.00% 0.0484 0.2200
    1.1 -0.1 15.80% 0.0586 0.2420
    1.2 -0.2 16.60% 0.0697 0.2640
    1.3 -0.3 17.40% 0.0818 0.2860
    1.4 -0.4 18.20% 0.0949 0.3080
    1.5 -0.5 19.00% 0.1089 0.3300
    1.6 -0.6 19.80% 0.1239 0.3520
    1.7 -0.7 20.60% 0.1399 0.3740

    Free Asset

    000 0.2500 0.3000 0.3500 0.4000

    sk Free Asset
    Sharpe Ratio
    #DIV/0!
    0.364
    0.364
    0.364
    0.364
    0.364
    0.364 A Weight of Equity
    0.364 3 0.55
    0.364 4 0.41
    0.364 5 0.33
    0.364 6 0.50
    0.364 7 0.24
    0.364 8 0.21
    0.364 9 0.18
    0.364 10 0.17
    0.364 11 0.15
    0.364 12 0.17
    0.364 13
    14

    25.00%

    20.00%

    15.00%

    A=3
    10.00%

    5.00%

    0.00%
    0.0000 0.0500 0.1000 0.1500 0.2000 0.2500 0.300

    Risky and Risk Free Asset A=3


    Weight of RF Exp Return SD
    0.45 11.41% 12.12%
    0.59 10.31% 9.09%
    0.67 9.64% 7.27%
    0.50 11.00% 11.00%
    0.76 8.89% 5.19%
    0.79 8.65% 4.55%
    0.82 8.47% 4.04%
    0.83 8.32% 3.64%
    0.85 8.20% 3.31%
    0.83 8.32% 3.64%

    A=3

    000 0.1500 0.2000 0.2500 0.3000 0.3500 0.4000

    Risky and Risk Free Asset A=3


    Expected return 8% 13%
    STD 12% 20%

    WD WE Pr risk
    0 1 0.13 20%
    0.1 0.9 0.125 18%
    0.2 0.8 0.12 17%
    0.3 0.7 0.115 15%
    0.4 0.6 0.11 14%
    0.5 0.5 0.105 13%
    0.6 0.4 0.1 12%
    0.7 0.3 0.095 12%
    0.8 0.2 0.09 11%
    0.9 0.1 0.085 12%
    1 0 0.08 12%

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