Application of various financial techniques to evaluate and compare value-at-risk (VaR) of selected NSE portfolio.

Evaluating the risk for any investment is a challenging task. It requires the determination of various factors impacting the asset under consideration. The value-at-risk (VaR) measure has been widely accepted as an effective tool for risk analysis. This study provides a risk analysis of a stock portfolio from the sectors of Oil and gas, Consumer goods and retail, Engineering products and services, Finance and Banking, and Healthcare. The stocks were selected based on their market capitalization in the National Stock Exchange (NSE), India. VaR is computed using various techniques, such as the historical method, parametric method, Monte-Carlo method, GARCH and historical conditional VaR (CVaR). Additionally, the optimal weights of each stock in the portfolio have been determined. This work excluded the period from March 2020 to December 2020 from the VaR analysis, as it witnessed a significant variation in stock prices due to the COVID-19 wave. The estimated VaR indicated that the historical conditional VaR showed the fewest violations, while GARCH estimated the minimum VaR compared to the other techniques and thus a relatively higher percentage of violations during backtesting. This work highlights the dynamic nature of financial risk and underscores the need for adaptive risk management strategies that can evolve with the changing market conditions. [ABSTRACT FROM AUTHOR]