Exchange Rate Forecasting and Value-at-Risk Estimation on Indonesian Currency Using Copula Method

DOI

10.2991/icame-18.2019.6How to use a DOI?

Keywords

Value-at-Risk, Monte-Carlo Simulation, Copula Methods, Exchange Rates

Abstract

This study aims to determine the future value and the value-at-risk estimation of four selected currencies, namely United States Dollar (USD), Australian Dollar (AUD), European Union Euro (EUR) and Japanese Yen (JPY) against Indonesian Rupiah (IDR). The Monte-Carlo simulation is implemented to estimate the future value of each currency relationship and integrating it with the concept from the copula method; the risk value estimation is conducted using Value-at-Risk (VaR), and the VaR estimation is within the range of 90%, 95% and 99% confidence interval. The copula method we use in this study is Clayton copula because it has the highest log-likelihood value compared to Frank and Gumbel copula; with an addition, each currency uses their regressive model to see if the selected exchange rates have the characteristic of a seasonal or non-seasonal pattern. The result we obtain in this study are JPY/IDR, and EUR/IDR relationships have the highest simulated loss and estimated risk values in each confidence interval.

Copyright

© 2019, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Kevin Bastian Sirait
AU  - Batara Maju Simatupang
PY  - 2019/08
DA  - 2019/08
TI  - Exchange Rate Forecasting and Value-at-Risk Estimation on Indonesian Currency Using Copula Method
BT  - Proceedings of the 3rd International Conference on Accounting, Management and Economics 2018 (ICAME 2018)
PB  - Atlantis Press
SP  - 49
EP  - 62
SN  - 2352-5428
UR  - https://doi.org/10.2991/icame-18.2019.6
DO  - 10.2991/icame-18.2019.6
ID  - Sirait2019/08
ER  -