In this thesis, a concept for investigating portfolio risks is introduced that can be applied to hedging of extreme losses. The proposed approach emerges mainly from two novel, successive ideas which are both engendered by the application of Markov switching modelling. The first concept is based on the estimation of a Markov switching model for individually composed portfolios. Thus, instead of focusing on economic states of financial markets which are inferred by representative indices, portfolio risk phases are determined that directly concern the investor. Whereas the core element of the second approach consists in considering the correlation between the portfolio and the hedge asset which is subject to fluctuations in the context of different states of the portfolio. Hence, in view of the best possible protection against portfolio losses, the hedge ratio is solely optimised for crisis periods of the portfolio. On the supposition that no investor is able to forecast the exact timeframe of a severe loss event, the hedge ratio is weighted by a parameter signalling future crisis assessment at each time point. In this manner, only a very small amount of protection instruments is admixed to the portfolio during prosperous upswing periods. Furthermore, a method of risk measurement is introduced which has so far been little regarded for practical purposes due to the lack of easy interpretability. Yet, it facilitates considering investor specific risk sensitivity. In order to validate and verify the proposed approach, option based hedging examples for a multi asset portfolio is performed.      «

In this thesis, a concept for investigating portfolio risks is introduced that can be applied to hedging of extreme losses. The proposed approach emerges mainly from two novel, successive ideas which are both engendered by the application of Markov switching modelling. The first concept is based on the estimation of a Markov switching model for individually composed portfolios. Thus, instead of focusing on economic states of financial markets which are inferred by representative indices, portfol...     »