Pušar Banović, D.: Measuring investment risk of financial instruments, using beta coefficient, VaR and CVaR model, BELCON Business Economy Law Education Conference 2022. 02 -03 June 2022, Belgrade
In the process of measuring the risk of investments in financial instruments, the beta coefficient, β, is calculated as a measure of systemic risk. The beta coefficient measures the volatility of the return of an individual financial instrument in relation to the returns of the entire market, which means that beta coefficient is a measure of the sensitivity of the return of an individual share in relation to the returns of the market.
The Value at Risk (VaR) model is used to estimate the future maximum possible risk of an individual investment or investment portfolio. VaR is a measure of risk defined for a certain period of time with a defined level of confidence, usually between 95% and 99%, expressed as a percentage of market value or in absolute terms.
The third model for measuring the risk of financial assets, the Conditional Value at Risk (CVaR) model, is an extension of VaR. CVaR is an estimate of the future maximum possible average loss, for a certain period of time with a defined level of confidence, usually between 95% and 99%.
The paper compares the calculated risk, of selected securities listed on the Zagreb Stock Exchange, using the three above mentioned risk measures and summarizes the advantages and disadvantages of each of the applied measurement methods.