Introduction

Abstract

Technological advances such as the introduction of the internet and increase of mobile devices have allowed for instant information sharing and consumption around the world. This has led world markets to become integrated, thereby increasing trading activity on the stock exchange by local and foreign investors. The purpose of each trading activity is very much dependent on the agenda of the participant. For instance, stocks can be bought or sold for different reasons such as the readjustment of the hedge position or for simple profit realisation. This random behaviour of the investors introduces a source of uncertainty to the markets that can have adverse effects on the evaluation of portfolio risk exposure. This uncertainty in the market variables is known as market risk. By definition, market risk is the potential loss of value of an asset due to movements in market factors.