Portfolio index risk estimation using Garch and VaR methods

Abstract

Portfolio managers around the world concerned with risk estimation because portfolio risk management is part of their decision-making process. Hull (2006, p. 435) notes, VaR is widely used by fund managers “to provide a single number summarizing the total risk in a portfolio of financial assets.” Motivates from this, we conduct an analysis to compare the effectiveness of VaR analysis and GARCH method in forecasting risk estimation. Risk manger can used the best methods in reducing their customers risk volatility and rank the risk level.