Abstract
Value at Risk (VaR) has already becomes a standard measurement that must be carried out by financial institution for both internal interest and regulatory. VaR is defined as the value that portfolio will loss with a certain probability value and over a certain time horizon (usually one or ten days). In this paper we examine of VaR calculation when the volatility is not constant using generalized autoregressive conditional heteroscedastic (GARCH) model. We illustrate the method to real data from Indonesian financial market that is the stock of PT. Indosat Tbk.
Highlights
There are some types of financial market risk, i.e. credit risk, operational risk and market risk
Value at Risk (VaR) in term of the financial institution is defined as a maximum lost on period of financial position with a certain probability
VaR is defined as a minimum lost under an extraordinary market condition
Summary
There are some types of financial market risk, i.e. credit risk, operational risk and market risk. VaR is single estimator of an institution position quantity decline of profit risk category on the market in the share period. This measure might be applied by the institution for estimating the risk and regulatory committee in this case for analyzing the investment opportunity (Jorion, 2004; Alexader, 1999). VaR is defined as a minimum lost under an extraordinary market condition These two definitions has a similar based on VaR measurement, the concept seems different In seeking the performance of the models, we’ll discuss them through the skewness and kurtosis coefficient values
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