VALUE-AT-RISK FOR MARKET RISK IN COMMERCIAL BANK

• Main Author: ZAM HARIRA , EMIL
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/18400
• Institution: Institut Teknologi Bandung

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.