Abstract:
This research investigates and examines the proper risk management of five European
commercial banks employing the Value at Risk (VaR) model through 2006 until 2020.
Two of these banks are located in France, while the other three are in Germany. The
collected data is monthly-based such that it consists of 180 observations. In order to
apply the VaR model, a pre-study is considered aiming to regress the dependent
variable (bank stock prices) on the independent variables (market indices, Three-Month
Treasury bill rate and exchange rate). The effectiveness of the independent variables is
considered statistically significant taking into account a 95% confidence interval. The major part in the methodology intends to use the variables’ coefficients and standard
deviations to evaluate the VaR for the studied commercial banks. The results obtained
show that the studied commercial banks are risky since they all have more than 15% as
a percentage of their equity that is at risk.
