VALUE-AT-RISK FOR MARKET RISK IN COMMERCIAL BANK
Commercial banks do trading activities in capital market to manage client's funds. While bank trades client's funds, bank has a risk of loss. to measure the risk of loss, bank do the calculation of Value-at-Risk (VaR) from their trading activities data. VaR is defined as a measure of lo...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/18400 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Commercial banks do trading activities in capital market to manage client's funds.
While bank trades client's funds, bank has a risk of loss. to measure the risk of
loss, bank do the calculation of Value-at-Risk (VaR) from their trading activities
data. VaR is defined as a measure of loss over a defined period for a given con-
dence interval. This thesis used some methods to calculate VaR including Historical
Simulation, Variance-Covariance, and Monte Carlo Simulation. After doing some
calculation and backtesting of VaR method, we discover that the most accurate VaR
method is Monte Carlo Simulation. this thesis also comparing direct VaR calcula-
tion from trading data with VaR calculation of GARCH(1,1). We find that VaR
calculation of GARCH(1,1) has lower VaR than direct VaR calculation from trad-
ing data. Despite having lower VaR, VaR calculation of GARCH(1,1) have a good
accuracy as well. This thesis not only doing VaR calculation of a bank but also do
the calculation of agregate VaR from a bank with two subsidiaries. In this part we
will see whether agregate risk have a greater risk than agregate of risk. |
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