RISK MANAGEMENT

Risk Management

RISK MANAGEMENT: DOW JONES AND NASDAQ

Question 1:

The NASDAQ Stock Market, initially stood for "National Association of Securities Dealers Automated Quotations Systems," but the exchange's authorized stance is that the acronym is obsolete. It is the biggest electrical devices screen-based equity securities dealing market in the United States and fourth biggest by market capitalization in the world.  With 2919 ticker emblems, it has more dealing capacity than any other electrical devices supply exchange in the world.

The Dow Jones Industrial Average (DJIA) is a weighted mean of 30 of the biggest supplies on the New York Stock Exchange. It is a very significant barometer of the wellbeing of the US finances and has a large leverage on supply markets round the world.

When we gaze at a graph of the DJIA from 1945 to 2010, we observe it is close to the exponential development bend that we contacted in the last section. It can be helpful to model the form of the bend so we can make a proposition for the future main heading of the curve. (As we glimpse subsequent, this is an unsafe thing to manage, but intriguing, particularly if we desire to be rich.) A "model" is just an adorned phrase for a function (or formula) that nearly agrees some discerned data.

Descriptive Analysis

Descriptive Statistics

N

Minimum

Maximum

Mean

Std. Deviation

Variance

NASDAQ

48

1377.84

2859.12

2.2178E3

351.36020

1.235E5

DOW

48

7062.93

13930.01

1.1196E4

1824.51705

3.329E6

Valid N (list wise)

48

Sampling

The data has been gathered of NASDAQ and Dow Jones from January 2006 to January 2010. It has been considered on monthly basis. The DJIA has been volatile since the peak of early 2006. There was a plunge after the September 11 terrorist attacks on the US in 2001 and it fell even farther before the Iraq conflict begun in 2003. However, the Dow retrieved all of the lost ground and peaked on 9 Oct 2007 at 14,163.

Then, the economic urgent position swabbed more than 50% off the worth of the DJIA by 9 Mar 2009, when it shut at 6547. Since then it has retrieved to over 10000.

It is clear that propositions founded on past presentation are very unsafe since our initial form (above) forecast that the DJIA would be at about 23,000 by the end of 2006 and over 30,000 by the end of 2010. Yet at the time of composing, the Dow is seated round only 10,500. It can be helpful to model the form of the bend so we can make a proposition for the future main heading of the curve. (As we glimpse subsequent, this is an unsafe thing to manage, but intriguing, particularly if we desire to be rich.) A "model" is just an adorned phrase for a function (or formula) that nearly agrees some discerned data.

"The skill to coordinate risk will not be overemphasized in these volatile market conditions," said NASDAQ OMX Executive Vice President John Jacobs. "The DWS NASDAQ-100 Volatility Target Index incorporates a volatility order entails, providing investors with plentiful degrees of exposure to world-class enterprises while simultaneously limiting ...