A Comparative Risk Analysis of Bangladesh in the SAARC Region: A Study of Value at Risk

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: The aim of this study is to find out how much more risky the stock market of Bangladesh is compared to the other South Asian Association of Regional cooperation (SAARC) countries and investigate the role of it in this region from risk perspective. Bangladesh is one of the potential markets for investment among the eight countries of SAARC. It is therefore high time to study market risk associated with the countries stock market. Value at Risk (VaR) has been applied to estimate market risk of the four countries. To evaluate competitive advantage of Bangladesh from risk perspective a portfolio analysis was conducted with three other SAARC countries. Two portfolios were created with and without Bangladesh to see whether it increases or decreases portfolio risk. Incremental Value at Risk (IVaR) was used to estimate the additional risk produced by including Bangladesh into the portfolio. Components Value at Risk (CVaR) was applied to measure individual countries contribution to the portfolio risk. Bangladesh was found less risky compared to India and Pakistan and inclusion of Bangladesh to the portfolio reduced the risk.

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