The project investigates the relative market and credit risk of various sectors in Indonesia, over a range of different economic conditions.
Particular focus is placed on Agriculture and Mining, which are essential sectors in Indonesia’s economy.
The findings are important to investors wishing to optimize risk and return and to lenders in understanding sectorial credit risk.
This project will measure market risk using Value at Risk (VaR) and Conditional Value at Risk (CVaR).
Credit risk is measured using Merton’s Distance to Default (DD) model and our own innovative Conditional DD (CDD) model which measures extreme credit risk.
Sectoral portfolio optimisation is explored using VaR and CVaR. The research is undertaken with two Indonesian industry partners.
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