RISK MANAGEMENT OF PORTFOLIO SECURITIES

Milena Jaksic

Faculty of Economics, University of Kragujevac, Kragujevac, Serbia

Investment funds in different types of financial assets are motivated by investors’ expectation to realize a profit. Since the expected return is not always certain, the investor is faced with a risk of his investment not giving results in accordance with the expectations. Therefore, the consideration of risk by which the concrete placement is hampered should not be neglected or left to intuition. An incorrect risk assessment can result in a lack of the expected return or a loss of a capital investment. The global financial crisis has indicated on the possible absence consequences of the comprehensive risk management, in other words, the inadequate perceiving of all the risks and their interdependencies. In this paper, the system of managing risks including their early identification, assessment, measuring and risk control is analyzed. At the same time, models providing an effective portfolio diversification in the function of reducing an investment risk have been analyzed. It is indicated that risk management requires the process flexibility without strongly relying only on mathematical models that failed to identify the growth of a systemic risk.

Keywords: risk management, diversification, portfolio, systemic risk

JEL Classification: G11, G22

Economic Horizons, 2012, Vol. 14, No. 3, pp. 155-168. doi: 10.5937/ekonhor1203151J