Comparison of Variance Covariance and Historical Simulation Methods to Calculate Value At Risk on Banking Stock Portfolio


  • Maria Yus Trinity Irsan Actuarial Science, President University
  • Evelyn Priscilla Actuarial Science, President University
  • Siswanto Siswanto 1,2Actuarial Science, President University



Value at Risk, Variance Covariance, Historical Simulation, Backtesting, Banking Stock Portfolio


In investing, all investors must be faced with risk that must be borne. Therefore, to determine the best strategy in investing, every investor must calculate the risk. One statistical approach that can be used to measure the risk is Value at Risk (VaR). VaR is defined as a tolerable loss with a certain level of confidence. The purpose of this research is to estimate VaR using Variance Covariance and Historical Simulation methods on banking stock portfolio consisting of three stocks for the period 11 September 2020-30 September 2021. Both methods will then be evaluated using backtesting to determine the accuracy of VaR and to obtain the best method. From the research results, if the holding period is 1 day, then the VaR calculation for banking stock portfolio using both methods can be used to estimate the risk at 99% and 95% confidence levels, except for the VaR value using the Variance Covariance method for banking stock portfolio at 95% confidence level. The results show that Variance Covariance method is the best method for 99% confidence level. As for the 95% confidence level, Historical Simulation method is the best method.


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