Analysis of Value at Risk Measurement Using The Variance-Covariance Method in The Securities Portfolio

Abstract

Bonds are one of the investment instruments with fixed income. One of the most popular bonds is government bonds, which are considered safer than corporate bonds or other investment instruments. Every financial investment instrument that provides a rate of return (return) will have risks. Choosing bonds with the smallest loss rate is one of the priorities of an investor. One of the steps that investors can take is to determine the value of Value at Risk (VaR) first to determine the maximum loss obtained when investing. This study will discuss the risks in Bank Jatim's FVTOCI portfolio by measuring the Value at Risk value of each selected bond sample and several portfolio combinations of these bonds. The bonds used as samples in this research are FR0068, FR0080, FR0096 and FR0098. The measurement of this VaR value uses the Varian-Covariance method, where the assumption of the data used is data with a normal distribution. The resulting VaR value can be used as a consideration for the company to choose bonds for its investment portfolio.