Risk decomposition as a risk management tool in financial markets

The rapid development in communication and technology in the last century has also led to the emergence of new financial instruments. In financial markets, which are becoming complex with development, investors may have difficulty making the right decisions in order to reach the goal of maximum return or minimum risk. Effective risk management and optimization is required for the portfolios to be created in this direction. When risk optimization is targeted, it is very important for the investor to know the types of risk that the portfolio has. At this point, it is necessary to make the financial risk decomposition and make a financial investment decision accordingly. In this study, working in a hypothetical portfolio for the purpose of determining the impact of the Global Economic Crisis in 2008 on the Borsa Istanbul (BİST), the pre-crisis period and the crisis and post-crisis period were analysed as two different periods. The total risk amounts calculated by using both the Incremental Value at Risk (IVaR)and the Capital Asset Pricing Model (CAPM)techniques are separated into systematic and non-systematic risk types. The results obtained in this way have been evaluated comparatively on the basis of stock/company and sector.