Comparative Analysis of Value-at-Risk in Market Risk Prediction in Banks Using GARCH Volatility

Girindra Chandra Alam (Faculty of Economics and Business, Universitas Indonesia, Salemba, Jakarta 10430, Indonesia)
Buddi Wibowo (Faculty of Economics and Business, Universitas Indonesia, Salemba, Jakarta 10430, Indonesia)

Quantitative Economics and Management Studies
Vol. 5 No. 3 (2024)

This study aims to compare the disclosure of Value at Risk (VaR) in market risk prediction among banks in Indonesia. By employing comparative and analytical methods, this research examines the effectiveness of VaR disclosure as a market risk prediction tool. Through the evaluation of VaR models disclosed by Indonesian banks and their comparison to a parametric model using asymmetric GARCH volatility for Variance Covariance Value at Risk, this study identifies the extent to which VaR disclosure can be relied upon to predict market risk. This research contributes to the understanding of risk management practices in the Indonesian banking sector and offers recommendations for improving market risk prediction accuracy through more effective VaR disclosures.