PORTFOLIO AND RISK MANAGEMENT

Portfolio and risk management are pivotal components of the financial markets, driving the investment decisions of individuals, institutions, and corporations. This paper explores the intricacies of constructing and managing portfolios while mitigating risks in an ever-evolving financial landscape. It seeks to provide a comprehensive understanding of the theoretical and practical frameworks that guide portfolio diversification, risk assessment, and management strategies. The study highlights the interplay between risk and return, emphasizing the need for informed decision-making to optimize investment outcomes. The research explores the evolution of portfolio theories from Markowitz’s Modern Portfolio Theory to modern behavioral finance and machine learning, focusing on asset allocation, diversification, and systematic risks. It also identifies legal frameworks. Risk management forms the core of this research, with an in-depth analysis of various risk types such as market, credit, liquidity, operational, and systemic risks. The study elaborates on the quantitative models and metrics used to measure risk, including Value at Risk (VaR), stress testing, and scenario analysis. Legal mechanisms, such as the SEBI Portfolio Managers Regulations in India and the role of the International Organization of Securities Commissions (IOSCO), are discussed in detail, along with landmark judgments influencing risk management practices. The research further investigates the role of technology, artificial intelligence, and big data in transforming portfolio and risk management practices. It also examines ethical considerations, the impact of market anomalies, and the integration of Environmental, Social, and Governance (ESG) factors in investment strategies. The paper concludes with policy recommendations to enhance transparency, investor protection, and systemic resilience in the financial markets.