Downside Risk and Moving Averages for Optimizing a Portfolio and the Process of Buying and Selling Financial Assets

• Grant number: 23/11616-4
• Support Opportunities: Scholarships in Brazil - Scientific Initiation
• Start date: October 01, 2023
• End date: September 30, 2024
• Field of knowledge: Interdisciplinary Subjects
• Principal Investigator: Silvia Maria Simões de Carvalho
• Grantee: Denise Maria Rodrigues
• Host Institution: Centro de Ciências e Tecnologias para a Sustentabilidade (CCTS). Universidade Federal de São Carlos (UFSCAR). Sorocaba , SP, Brazil

Abstract

Area of financial applications has become increasingly complex and challenging. Trading in these areas requires a detailed understanding of market dynamics and the ability to react quickly to changes. Optimizing investment portfolios using Markowitz's Portfolio Theory is a practice that has been used with significant recurrence for some time. However, with the advancement of studies subsequent to the creation of this theory, Markowitz's Modern Portfolio Theory emerged, with the Downside Risk Model aiming to obtain more accurate results.In this work, an algorithm in Python of the Downside Risk Model will be implemented with the application of moving averages, to help when buying and selling assets, the algorithm should show the risk that the investor is taking linked to a certain yield, in addition, should automatically update the portfolio respecting the investor's profile (conservative, moderate and bold).