Technical analysis in estimating currency risk portfolios: case study: commercial banks in Romania

• Main Authors: Balteş Nicolae, Rodean (Cozma) Maria-Daciana
• Format: Article
• Language: English
• Published: Taylor & Francis Group 2019-01-01
• Series: Ekonomska Istraživanja
• Subjects: value at risk (var) method; method based on historical simulations; standard deviation; maximum loss; currency net position; financial instruments
• Online Access: http://dx.doi.org/10.1080/1331677X.2018.1561318

Value at Risk method became one of the most used tools in bank management in order to estimate the losses resulting from a foreign currency portfolio. The study aims to estimate the maximum loss for the euro currency due to exchange rate volatility by establishing VaR, starting from the method based on historical simulations. The sample of the research consists of the four commercial banks listed on the Bucharest Stock Exchange (BSE), respectively: Romanian Commercial Bank SA (member of Erste – BCR Group); Romanian Development Bank – Groupe Societe Generale (BRD); Transylvania Bank SA (BT) and Carpatica Bank (BCC), based on a number of 757 observations corresponding to the working days in the period 1 January 2012 – 31 December 2014. The results obtained from the research showed that in case of the analyzed banks the maximum anticipated loss in a future time horizon of 10 days, with a relevance of 1%, does not exceed 2% of the net positions on the euro currency. The study could not be extended to other currencies, because in the information available for the four commercial banks only the net position on the euro currency is separately expressed.