Utilizing Monte Carlo Simulation to Determine Value at Risk in the Wireless Telecommunications Industry

Abstract

This study aims to calculate the Value at Risk (VaR) in the stock portfolio using the Monte Carlo simulation method. Value at risk (VaR) is a widely used measure of the risk of loss in a particular portfolio of financial assets. The result of this study is to determine the maximum loss that investors in the portfolio can receive. The experiment was used 500 times to describe the risk. The stock portfolio comes from the Wireless Telecommunication Sector on the Indonesian Stock Exchange, namely PT Smartfren Telecom Tbk (FREN), PT Indosat Tbk (ISAT), and PT XL Axiata Tbk. (EXCL) PT. Telkom Indonesia Tbk (TLKM), The assumption of the calculation of the VaR is based on a capital investment of IDR 200,000,000 in each share. According to the analysis, the results show negative results, which may cause investors losses by investing in the five stocks. The VaR value generated by FREN is+0.3434 maximum loss of IDR (686,709.01); ISAT VaR+0.3732 maximum loss of IDR (746,484.6S); EXCL with a VaR of +0.1731 with a total loss of IDR (346,230.10), TLKM with a VaR of +0.111 with a maximum loss of (222,106.53).