Journal of American Science 2012;8(9) http://www.jofamericanscience.org 488 Determining the Optimized Portfolio of Agriculture Products in Iran Mercantile Exchange: Application of Value at Risk approach Masoud Dehdashti 1 , Seyed-Ali Hosseini-Yekani 2 , Hamid Mohammadi 3 1. Department of Economics and Management, Dashtestan Branch, Islamic Azad University, Dashtestan, Iran 2. Department of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran 3. Department of Agricultural Economics, University of Zabol, Zabol, Iran dehdashti@diau.ac.ir Abstract: During recent decade and after considering risk management consist of financial asset, criteria for evaluating risk based on probability that we can call it value at Risk is so important. In this case, this study determines the optimized portfolio of agriculture product in Iran Mercantile Exchange for two groups of investors with average investment of 10 and 100 million Rials by using of value at Risk. Data which is used in this study is consisting of statistic of price about 150 work days for 11 products in 2011. For analyzing information, LINGO software is used and result showed that the crap of beet and edible wheat are two products which are included in all optimized portfolios. Also it is recognized that relation between VaR extend and diversity of portfolio is opposite in the way that in the lower level of risk, portfolios are more diversified than high level of risk and the relation between risk- return is advantageous for risk averse investors. [Dehdashti M, Hosseini-Yekani SA, Mohammadi H. Determining the Optimized Portfolio of Agriculture Products in Iran Mercantile Exchange: Application of Value at Risk approach. J Am Sci 2012;8(9):488-492]. (ISSN: 1545-1003). http://www.jofamericanscience.org. 68 Keywords: Determining optimized portfolio; Value at Risk; agriculture products; Iran Mercantile Exchange 1. Introduction Today's stock market as an important tool in capital market, have specific role in economic growth, and by pricing, risk reduction, tooling of resource, and optimize allocation of asset, provide the basis for economic development [4]. In developed country, most of investment is done via financial market. Active Participation of people in stock market guarantees vitality of capital market. Most important challenges of investors in these markets is choosing appropriate stock for investment and creating optimized portfolio which is one of ways for controlling investment risk [1]. Portfolio is one of the important tools for financial management, and the purpose of creating portfolio is maximizing return via investment in different combination of stock [9]. In this case, different theory is presented by expert who consider problem of choosing portfolio from different viewpoint [1]. According to the modern theory of portfolio, assumption is that investors are risk evaders. It means that between two assets with equal efficiency rate, they choose the asset that has lower level of risk [11]. Investors which accepted modern theory of portfolio believe that they do not have power for contrast with market. Therefore, they keep different kind of stock that their return will be equal to average return of market and can reach to appropriate return rate which in near to the market return rate [11]. One of the results of modern portfolio theory is that in the complete market, there is no limitation for borrowing buy and sell and transaction cost of investors is by extreme low, Investors tend to diversify their portfolio. This is because each extra stock that its return do not have a linear relation with existing stock, can help diversified portfolio and have an impact on reducing risk and in this way can increase utility of investors [5]. There is different ways for creating optimized portfolio in which one of this ways is using value at Risk criteria. This study tries to determine an optimized portfolio in Risk-Return framework for investment in agriculture product of Mercantile Exchange. In this way, weight of special asset in portfolio must be in what extent and if this asset should be entered the portfolio or not? Always this question was posited for real and lawful investors that which stock they should keep in their investment portfolio? One of issue that has impact on this decision making is previous trend in efficiency stock change. Awaring from these changes create large viewpoint but in the same way summarizing large volume of information and determining the best possible combining is prerequisite of decision making. In this way, we use the model of value at Risk that by using this model, investors have possibility for right management and have an ability to achieve to the specific efficiency by lower risk. There are many studies in determining optimized portfolio in stock exchange that we can refer to following case.