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VaR Model for Managing Market Risk of Portfolio

Firman Pribadi (Universitas Muhammadiyah Yogyakarta, Indonesia)
Arni Surwanti (Universitas Muhammadiyah Yogyakarta, Indonesia)
Wen-Chung Shih (Asia University, Taiwan)

Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from SEA

ISBN: 978-1-83797-285-2, eISBN: 978-1-83797-284-5

Publication date: 9 November 2023


In this study, the authors propose a VaR method for evaluating the market risk of investing in the stock portfolio of Pension Institutions. The data used for this research is hypothetical data, including the exposure or the amount of value invested by Pension Institutions in their stock portfolio. With the VaR – Monte Carlo simulation, the authors know the loss level will occur when the Indonesian economy or market conditions deteriorate. The lost value amount is determined in the Rupiah value, according to the confidence level or the desired percentile level. The results revealed that at the 5% (99.95%) percentile level of confidence, a pension fund with an investment value of IDR 4,070,000,000 would suffer a loss of IDR 1,110,000,000. While at the 1% (99.995%), the loss rate will be of IDR 1,480,000,000. The conclusion is that the results of this study are useful for Pension Institutions in managing their asset portfolios with the VaR model.



Pribadi, F., Surwanti, A. and Shih, W.-C. (2023), "VaR Model for Managing Market Risk of Portfolio", Barnett, W.A. and Sergi, B.S. (Ed.) Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from SEA (International Symposia in Economic Theory and Econometrics, Vol. 33B), Emerald Publishing Limited, Leeds, pp. 165-172.



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