CHAPTER-III LITERATURE REVIEW Review of literature is not up to the mark. Changes are required. More related information should to be included. A security is a , representing financial value. Securities are broadly categorized into securities (such as , and ) and securities, e.g., ; and contracts, such as , , and . The company or other entity issuing the security is called the issuer. A country's regulatory structure determines what qualifies as a security. For example, private investment pools
Hazard Prevention: prevention refers to the prevention of risks in an emergency. The first and most effective stage of hazard prevention is the elimination of hazards. If this takes too long, is too costly, or is otherwise impractical, the second stage is . Risk reduction: Risk reduction or "optimization" involves reducing the severity of the loss or the likelihood of the loss from occurring. For example, are designed to put out a to reduce the risk of loss by fire. This method may cause a greater loss by water damage and therefore may not be suitable. fire suppression systems may mitigate that risk, but the cost may be prohibitive as a . Acknowledging that risks can be positive or negative, optimizing risks means finding a balance between negative risk and the benefit of the operation or activity; and between risk reduction and effort applied. By an offshore drilling contractor effectively applying HSE Management in its organization, it can optimize risk to achieve levels of residual risk that are tolerable. Modern software development methodologies reduce risk by developing and delivering software incrementally. Early methodologies suffered from the fact that they only delivered software in the final phase of development; any problems encountered in earlier phases meant costly rework and often jeopardized the whole project. By developing in iterations, software projects can limit effort wasted to a single iteration.
Risk retention: Involves accepting the loss, or benefit of gain, from a risk when it occurs. True falls in this category. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible. is an example since most property and risks are not insured against war, so the loss attributed by war is retained by the insured. Also any amount of potential loss (risk) over the amount insured is retained risk. This may also be acceptable if the chance of a very large loss is small or if the cost to insure for greater coverage amounts is so great it would hinder the goals of the organization too much. Create a Risk Management Plan: Select appropriate controls or countermeasures to measure each risk. Risk mitigation needs to be approved by the appropriate level of management. For instance, a risk concerning the image of the organization should have top management decision behind it whereas IT management would have the authority to decide on computer virus risks. The risk management plan should propose applicable and effective security controls for managing the risks. For example, an observed high risk of computer viruses could be mitigated by acquiring and implementing antivirus software. A good risk management plan should contain a schedule for control implementation and responsible persons for those actions. According to , the stage immediately after completion of the phase consists of preparing a Risk Treatment Plan, which should document the decisions about how each of the identified risks should be handled. Mitigation of risks often means selection of , which should be documented in a Statement of Applicability, which identifies which particular control objectives and controls from the standard have been selected, and why. Implementation:
Covariance (COV ab) = 1/6 (15,682.15) = 2,613.7 Correlation Coefficient = COV ab/a*b a = 47.27; b =70.23 =2,613.7/(47.27)(70.23) = 0.787 CALCULATION OF PORTFOLIO WEIGHTS: FORMULA : Wa = b [b-(nab*a)] a2 + b2 - 2nab*a*b Wb = 1 – Wa WEIGHTS OF WIPRO & OTHER COMPANIES: WIPRO & DR. REDDY a = 22.86 b = 46.66 Nab = -0.184 WA = 46.66 [46.66-(-0.184*)] 2 + 2 – 2(-0.184)** WA = 2,373.42 3,092.2615 WA = 0.77 Wb = 1 – Wa Wb = 1- 0.77 = 0.23
WIPRO (a) & ACC (b) a = 22.86 b = 47.27 Nab = 0.247 WA = 47.27 [- (0.25*)] 2 + 2 – 2(0.5)** WA = 1,964.82 1,767.66 WA =1.11 Wb = 1 – Wa Wb = 1- 1.11 = -0.11 WIPRO(a) & HERO(b) a = 22.86 b = 70.23 Nab = 0.28 WA = 70.23 [70.23-(0.28*22.86)] 2 + 2 – 2(0.28)** WA = 4,482.88 4,555.77 WA = 0.98 Wb = 1 – Wa Wb = 1-0.98 = 0.02 WEIGHTS OF DRREDDY & OTHER COMPANIES: DRREDDY (a) & ACC (b) a = 46.7 b = 47.7
Nab = 0.74 WA = 47.7 [47.7- (0.74*46.7)] 2 + 2 – 2(0.74)** WA = 602.6 1,149.01 WA = 0.52 Wb = 1 – Wa Wb = 1- 0.52 = 0.48 DRREDDY (a) & HERO(b) a = 46.67 b = 70.23 Nab = 0.37 WA = 70.23 [70.23-(0.37*46.67)] 2 + 2 – 2(0.37)** WA = 3,722.2 2,506.9 WA = 1.48 Wb = 1 – Wa Wb = 1-1.48 = -0.48 WEIGHTS OF ACC & OTHER COMPANIES ACC (a) & HERO(b) a = 47.3 b = 70.23 Nab = 0.79
WA = 70.23 [70.23- (0.79*47.3)] 2 + 2 – 2(0.79)** WA = 2,308.5 1,921.43 WA = 1.20 Wb = 1 – Wa Wb = 1- 1.20 = -0.20 CALCULATION OF PORTFOLIO RISK: RP = (a*Wa)2 + (b*Wb)2 + 2*a*b*Wa*Wb*nab CALCULATION OF PORTFOLIO RISK OF WIPRO & OTHER COMPANIES: WIPRO (a) & DR.REDDY (b): a = 22.86 b = 46.66 Wa = 0.78 Wb = 0.23 Nab = -0184 RP = (22.86*0.78.)2+(46.66*0.23) 2(22.86)(46.66)(0.78(0.23)(-0.184) 355.6 18.86%
DISPLAY OF ALL CALCULATED VALUES COMBINATION CORRELATION COVARIANCE PORTFOLIO RETURN PORTFOLIO RISK WIPRO & DR.REDDY -0.184 -196.72 3.7 18.9 WIPRO & ACC 0.247 267.69 0.49 23.5 WIPRO &HERO 0.28 449.7 5.0 22.9 DR.REDDY & ACC .7434 1639.8 20.5 43.9 DR.REDDY & BHEL 0.7969 3047.7 -21.7 22.9 DR REDDY&HERO 0.705 1,124.1095 -14.6 15.3 ACC&BHEL 0.917 3,558.65 21.07 63.8 ACC & HERO 0.7873 2,613.7 43.9 42 Interpretations The analytical part of the study for the 6 years period reveals the following interpretations, Wipro with acc: Portfolio weights for wipro and ACC are (1.11) and (-0.11) respectively. This indicates that the investors who are interested to take more risk they can invest in this combination, and also can get high returns. Dr reddy & hero: