Risk Management

Our Motivation

In the wake of the financial crisis of 2008, we believe that it is useful to present in some detail the topic of risk management applied to financial investment. By using comprehensible mathematical models we feel that it is possible to assess the statements and recommendations of investment consultants and the press. Our method can be thought of as a kind of protection kit for investors. We hope that the simplicity and independence of this approach will motivate many types of investors to take charge of their financial decisions, without a great investment in time.

Our Approach

When analyzing stock markets there are very different, partly overlapping approaches: technical analysis, often called chart analysis, fundamental analysis and econometric models of the stock market, the results of which are presented below. In addition to the common random walk model (Black-Scholes model) we also use more complex models to better represent the observed stock market data. These models are based on the assumption of local trends, i.e. the existence of bull and bear markets. With historical data of various indices like the US S&P 500 index or the German DAX index we can infer the probability of future gains and losses. These probability formulations are the basis of our portfolio management strategy and our analysis of market signals and certificates.


Portfolio Management

Return on Investment vs. Risk: Just a small percentage of stock in your portfolio may provide a significant improvement in your portfolio's return. However, too large a percentage of stock, combined with a buy-and-hold strategy, will reduce the most probable return of the portfolio. more

Market Signals

Because bull and bear markets usually last for a long time (≥ 1 year, on average), it is possible to estimate when they will end. So you can reduce the risk of a stock investment and further increase the portfolio return. more

Certificate Analysis

How to choose the right certificates? more