Building R package for measuring value at risk on market risk

Abstract

Nowadays, many of financial software developed for measuring market risk, especially the Value at Risk (VaR) on Bank for international Settlement (Basel) II capital accord reporting. Yet, many of these softwares are commercial. In the mean time, R is statistical software that has General Public License and can be used by public. This research produces an application used in banking risk management which made paiticularly for measuring VaR in market risk. The application builds in R version 2.7.0 with GUI using teltk package. It consists of five tabs. The tabs are "Input Data", "Simulasi Monte Carlo", "Simulasi Historis", "Variance Covariance" and "Bantuan". It requires three inputs for measuring VaR, Tile risk faclor, exposure of assets, and scenario of portfolio. These three inputs then can produce single asset VaR and portfolio VaR. If the user chooses the variance covariance method the system will also return estimation of volatilit)'. It can also show the matrix plol, correlation matrix, time series plot and statistic descriptive of risk factor.