Analysis of Risk using Value at Risk (VaR) After Crisis in 2008 Study in Stocks of Bank Mandiri, Bank BRI and Bank BNI in 2009-2011

Abstract

Value at Risk (VaR) is a tool to predict the greater loss less than the certain confidence level over a period of time. Value at Risk Historical Simulation produce reliable value of VaR because of the historical data and measure the skewness of the observe data. So, Value at Risk well used by investors to determine the risk to be faced on their investment. To calculate VAR it is better to use maximum likelihood, which has been considered for estimating from historical data and also available for estimating nonlinear model. It is also a mathematic function that can approximate return. From the maximum likelihood function with normal distribution, we can draw the normal curve at one tail test. This research conducted to calculate Value at Risk using maximum likelihood. The normal curve will be compared with data return at each bank (Bank Mandiri, Bank BRI and Bank BNI). Empirical results demonstrated that Bank BNI in 2009, Bank BRI in 2010 and Bank BNI in 2011, had less value of VaR by historical simulation in each year. It is concluded that by using maximum likelihood method in the estimation of VaR, has certain appropriates compared with the normal curve.

Value-at-Risk Analysis in Risk Measurement and Formation of Optimal Portfolio in Banking Share

“…Historical simulation provides the advantage of using actual historical data that reflects the actual state of the market and is easy for investors and management to understand. The study results prove that historical simulation accurately estimates bank risk in the 2009-2011 crisis (Fadhila & Rizal, 2013). Amin et al (2018) supported these results by proving that in the crisis period, the historical simulation method is a more accurate method than the standard delta method through the calculation of Mean Square Error (MSE).…”

“…(2020) also supported the results by proving that the historical simulation method was the best and consistent method in estimating the VaR of single stocks and portfolios based on backtesting. Fadhila and Rizal (2013) proved the risk estimation (VaR) in the crisis period 2009-2011 on BRI and BNI bank stocks with a historical simulation approach provided accurate results. Another study on the evaluation of the performance of VaR in emerging stock markets conducted by Raghavan et al (2017) supported the results of this study by proving the historical simulation method was appropriate to use on the Russian and Indian stock markets during the crisis market.…”