Analysis of Value at Risk (VaR) on selected banks’ price fluctuation”

ANALYSIS OF VALUE AT RISK (VAR) ON SELECTED BANKS’ PRICE
FLUCTUATION
MD. RASHEDUZZAMAN CHOWDHURY
STUDENT ID 0123160115415
THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR
THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
FACULTY OF BUSINESS & ACCOUNTANCY
LINCOLN UNIVERSITY COLLEGE
MALAYSIA
May 2016

i
Letter of Transmittal
To
Dr. Manjari Sharma
Associate Professor
Faculty of Business & Accountancy
Lincoln University College, Malaysia.
Subject: Submission of Research Report.
Honorable Madam,
With due respect, I, hereby, submit my report titled “Analysis of Value at Risk (VaR) on
selected banks’ price fluctuation” which was assigned to me as an integral part of my course
requirements in MBA Program.
It is a very good opportunity for me to prepare the report properly out of empirical data, as well
as, application of theoretical knowledge.Preparing this report has been extremely challenging,
interesting and rewarding experience. Now, it is very easy for me to interpret return behavior of
VaR in banking sector. I would like to express my deepest gratitude to you for providing me
such opportunity.
Due to various constraints, there may be some mistakes for which I beg your apology.
Yours faithfully,
Md. Rasheduzzaman Chowdhury
ID No. 0123160115415
Master of BusinessAdministration
Lincoln University College
Malaysia

ii
Letter of Transmittal
To
The Dean
Lincoln University College,
Malaysia
Subject: Submission of ResearchReport.
Dear Sir,
With due respect, I, hereby, submit my report which was assigned to me as an integral part of my
course requirements in MBA program.
Preparing this report has been extremely challenging, interesting and rewarding experience.
Now, it becomes very easy for me to interpret return behavior of VaR in banking sector. I would
like to express my deepest gratitude to you for providing me with such an opportunity.Ihave tried
my best to make this report comprehensive and informative. Due to various constraints, there
may be some mistakes for which I beg your apology.
Yours faithfully,
ID No. 0123160115415
Master of BusinessAdministration
Malaysia

iii
Supervisor Certificate
I, hereby, certify that the report entitled “Analysis of Value at Risk (VaR) on selected banks’
price fluctuation” in fulfillment of the MBA Program requirements prepared under my
supervision by Md. Rasheduzzaman Chowdhury has been completed during the prescribed
period.
I wish him every success in his future endeavor.
Dr. Manjari Sharma
Associate Professor
Malaysia

iv
Dean Certificate
I, hereby, certify that the report entitled “Analysis of Value at Risk (VaR) on selected banks’
price fluctuation” in fulfillment of the MBA Program requirements prepared under Faculty of
Business & Accountancy by Md. Rasheduzzaman Chowdhury has been completed during the
prescribed period.
I wish him every success in his future endeavor.
Dr. Abhijit Ghosh
Dean
Malaysia

v
Student’s Declaration
This report prepared using the relevant documents related to “Analysis of Value at Risk (VaR)
on selected banks’ price fluctuation” composed by Md. RasheduzzamanChowdhury,ID
No:0123160115415, a student of Master of Business Administration, Lincoln University
College, Malaysia. The report is solely academic.
ID No: 0123160115415
Master of Business Administration
Lincoln University College,
Malaysia

vi
Acknowledgement
First of all, I remember Almighty Creator (Allah) for making me successful to prepare this
ResearchReport.At the very outset, I would like to thank Dr. Manjari Sharma, Associate
Professor for giving the opportunity to know about the Return behavior of Value at Risk, and
without her support and direction it would never be possible for me to make this report. I would
like to give thanks to the Department for giving me an opportunity to learn about the Return
behavior of Value at Risk at banking Sector in Bangladesh.
Besides, I am also grateful to the authors, researchers, and articles writer whose Thesis papers
and journals have helped me to prepare my research report successful.

vii
Executive Summary
This paper applies risk &return calculation of bank sector of Bangladesh. The main aim is
achieved through Value at Risk (VaR) Model of three selected Banks (International Finance
Investment and Commerce Bank limited,Islami Bank Bangladesh Limited and Jamuna Bank
Limited). Measurement of VAR analysis helps identify what would be the minimum and
maximum risk & return in with 90% & 95% confidence and what if in worstcase while with 90%
& 95% confidence is not true. The risk calculation of this industry ismeasured in terms Historical
VAR & Normal distribution VAR, Mean, Standard deviations used. The study covers three
public sector bank companies listed on Dhaka StockExchange. The data has been obtained from
the day closing price of the stock for theperiod of five year from 1st January 2007 to 31st
December 2011.we found that theHistorical return and normal return are slightly different for the
selected banks. These studies willhelp investors to identify the nature of risk and return behavior
of the banking sector ofBangladesh and will also help to take investment decision.
The mean of the daily returns of selected banks are not equal. Mean value of JBL & IBBL are
both equal of a value of 0.004 but IFIC bank’s mean is slightly low from them. Standard
Deviation of JBL is higher than that of IFIC and IBBL. According to normal distribution data,
with 90% confidence IBBL lose rate is low compared to IFIC bank and JBL. As well as with
95% confidence, the low risk provides bank is IBBL. And the highest risk provides bank is
Jamuna bank Limited both 90% & 95% confidence. According to historical distribution data,
with 90% confidence, IBBL provides the lowest risk compared to other banks According to
historical data, with 95% confidence IBBL gives the lowest losses. The kurtosis is equal to
selected three banks. IFIC bank provide the high skewness as well as IBBL provide the low
skewness.
Using VaR, I think IBBL is the best for investmentcompared to other two banks because of low
risk association.

i
Table of Contents
Letter of Transmittal ..............................................................................Error! Bookmark not defined.
Letter of Transmittal ..............................................................................Error! Bookmark not defined.
Supervisor Certificate.............................................................................Error! Bookmark not defined.
Dean Certificate......................................................................................Error! Bookmark not defined.
Student’s Declaration .............................................................................Error! Bookmark not defined.
Acknowledgement............................................................................................................................vi
Executive Summary........................................................................................................................vii
Chapter One.....................................................................................................................................1
Introduction...............................................................................................................................................1
Objectives of the Report: ..........................................................................................................................2
Methodology.............................................................................................................................................2
Chapter two......................................................................................................................................3
Literature Review......................................................................................................................................3
Chapter Three ..................................................................................................................................6
Description of VaR ...................................................................................................................................6
What is Value at Risk?..............................................................................................................................6
Varieties of VaR......................................................................................................................................7
VaR in Governance.................................................................................................................................8
Mathematical Definition.....................................................................................................................8
Risk measure and risk metric ................................................................................................................9
VaR risk Management..........................................................................................................................10
Computation Method........................................................................................................................12
VaR, CVaR and EVaR .....................................................................................................................12
Chapter Four..................................................................................................................................13
History ....................................................................................................................................................13
Central bank: Bangladesh Bank..........................................................................................................14
Scheduled Banks.................................................................................................................................14
Non-Scheduled Banks.........................................................................................................................14

ii
State-owned commercial banks ........................................................................................................15
Private commercial banks..................................................................................................................15
Islamic Commercial Banks.................................................................................................................16
Foreign commercial banks .................................................................................................................17
Specialized banks................................................................................................................................17
Chapter Five...................................................................................................................................18
A Brief Review of Selected Banks .........................................................................................................18
Islami Bank Bangladesh Limited........................................................................................................19
International Finance Investment and Commerce Bank Limited........................................................25
Chapter Six.....................................................................................................................................26
Performance analysis of Financial Data of IBBL, JBL and IFIC ...........................................................26
Chapter Seven ................................................................................................................................32
VaR Analysis of selected Banks.............................................................................................................32
Jamuna Bank Limited – 2009 .............................................................................................................32
IFIC BANK LIMITED .......................................................................................................................34
Islami Bank Bangladesh Limited........................................................................................................36
Comparing VaR of these three Banks.....................................................................................................38
Conclusion......................................................................................................................................39
References ........................................................................................................................................ i

iii
List of Tables
TABLE 1 NAME OF BANKS ..................................................................................................... 26
TABLE 2 DEPOSITED EARNING RATIO............................................................................... 26
TABLE 3 EARNING PER SHARE............................................................................................. 27
TABLE 4 RETURN ON ASSET.................................................................................................. 28
TABLE 5 PRICE EARNING RATIO.......................................................................................... 29
TABLE 6 NET ASSET VALUE PER SHARE............................................................................ 30
TABLE 7 VAR OF JAMUNA BANK LIMITED-2009 .............................................................. 32
TABLE 8 VAR OF IFIC BANK LIMITED-2009 ...................................................................... 34
TABLE 9 VAR OF IBBL-2009.................................................................................................... 36
TABLE 10 COMPARING VAR OF BANKS ............................................................................. 38
List of Figures
FIGURE 1 DEPOSITED EARNING RATIO.............................................................................. 27
FIGURE 2 EARNING PER SHARE............................................................................................ 28
FIGURE 3 RETURN ON ASSET................................................................................................ 29
FIGURE 4 PRICE EARNING RATIO ........................................................................................ 30
FIGURE 5NET ASSET VALUE PER SHARE........................................................................... 31
FIGURE 6 FREQUENCY DISTRIBUTION OF JBL- 2009....................................................... 32
FIGURE 7 VAR OF IBBL-2009 .................................................................................................. 36

1
Chapter One
Introduction
Now-a-days, the banking sector is the most important sector in our country because the world is
becoming more trade and commerce oriented. To fulfill this purpose properly exchange of
currency is very important. For this reason the banking sector is getting more attention day by
day. Islami Bank Bangladesh limited, Jamuna Bank Limited, International Finance Investment &
commerce Bank limited are of the three banks in Bangladesh. There are many departments in
this Bank. That are- inland remittance and clearing department, account opening department,
cash department, foreign exchange department, accounts department, investment department and
IT department. Among those inland remittance and cheque clearing department is very important
and This department deals with Pay Order (PO), Demand Draft (DD), and Telegraphy Transfer
(TT), Local Bill Collection (LBC), Outward Bill Collection (OBC), inward cheque clearing,
outward cheque clearing etc. This comprehensive report will describe about all the aspects of
service quality of inland remittance and cheque clearing department of this bank and it will also
provide some guidance and recommendations to improve the service efficiency of this
department.

2
Objectives of the Report:
The main objectives of the repot are shown below:
 To evaluate performance analysis of selected banks.
 To examine Value at Risk of Islami Bank Bangladesh Limited at both 90% and 95%
confidences.
 To examine Value at Risk of IFIC Bank ltd at both 90% and 95% confidences.
 To examine Value at Risk of Jamuna Bank of Bangladesh Limited at both 90% and 95%
confidences.
 To compare VaR for the selected banks to suggest for investment decision.
Methodology
The study requires a systematic procedure from selection of the topic to preparation of the final
report. To perform the study, the data sources is to be identified and collected, to be classified,
analyzed, interpreted and presented in a systematic manner and key points are to be found out.
The overall process of methodology has been given as below.
This report is solely based on secondary data. And the data sources are listed below:
1. Annual reports of Islami Bank Bangladesh limited, Jamuna Bank Limited, International
Finance Investment & commerce Bank limited.
2. Publications obtained from library of Islami Bank Bangladesh limited, Jamuna Bank
Limited, International Finance Investment & commerce Bank limited.
3. Official web site of the Islami Bank Bangladesh limited, Jamuna Bank Limited,
International Finance Investment & commerce Bank limited.

3
Chapter two
Literature Review
Duffie & Pan-(1997)describe that VaR describes some of the basic issues involved in measuring
the market risk of a financial firm’s “book”., the list of positions in various instruments that
expose the firm to financial risk. While there are many sources of financial risk, they concerted
here on market risk, meaning the risk of unexpected changes in price or rates.
Eberlein, Keller, & Prause(1998)investigate a new basic model for asset pricing, the hyperbolic
model, which allows an almost perfect statistical fit of stock return data. After a detailed
introduction into the theory we use secondary market data to compare the hyperbolic model to
the classical Black‐Schools model. We study implicit volatilities, the smile effect, and pricing
performance. Exploiting the full power of the hyperbolic model, we construct an option value
process from a statistical point of view by estimating the implicit risk‐neutral density function
from option data. Finally, we present some new value‐at‐risk calculations leading to new
perspectives to cope with model risk.
Kuester, Mittnik, & Paolella(2006) give the growing need for managing financial risk, risk
prediction plays an increasing role in banking and finance. In this study we compare the out-of-
sample performance of existing methods and some new models for predicting value-at-risk
(VaR) in a universities context. Using more than 30 years of the daily return data on the
NASDAQ Composite Index, we find that most approaches perform inadequately, although
several models are acceptable under current regulatory assessment rules for model adequacy. A
hybrid method, combining a heavy-tailed generalized autoregressive conditionally
heteroskedastic (GARCH) filter with an extreme value theory-based approach, performs best
overall, closely followed by a variant on a filtered historical simulation, and a new model based
on heteroskedastic mixture distributions. Conditional autoregressive VaR (CAViaR) models
perform inadequately, though an extension to a particular CAViaR model is shown to outperform
the others.

4
Pritsker(1997) findthe different methods of computing Value at Risk generate widely varying
results, suggesting the choice of VaR method is important. They examine six methods and
compare their computational time requirements and their accuracy when the sole source of
inaccuracy is errors in approximating nonlinearity. Simulations using portfolios of foreign
exchange options showed fairly wide variation in accuracy and unsurprisingly wide variation in
computational time. When the computational time and accuracy of the methods were examined
together, four methods were superior to the others. The article also presents a new method for
using order statistics to create confidence intervals for the errors and errors as a per cent of true
value at risk for each VAR method. This makes it possible to easily interpret the implications of
VAR errors for the size of shortfalls or surpluses in a firm's risk-based capital.
Christoffersen & Pelletier(2004) saythe financial risk model evaluation or back testing is a key
part of the internal model's approach to market risk management as laid out by the Basle
Committee on Banking Supervision. However, existing back testing methods have relatively low
power in realistic small sample settings. Our contribution is the exploration of new tools for
backtesting based on the duration of days between the violations of the Value-at-Risk. Our
Monte Carlo results show that in realistic situations, the new duration-based tests have
considerably better power properties than the previously suggested tests.
Trevor & Susan j.thorp(1998) studied on VAR models of the Australian economy estimated on
quarterly data for fifteen variables to 1985 (4). They forecasted year outcomes for 1986-87 (on
an ex-ante basis) is compared with that of three sets of private sector forecasts, the 1986-87
Budget forecasts and the actual outcomes from the same period.. Each VAR model is estimated
using a different method for allowing for trends in the data. The detruding procedure is an
important determinant of the quality of forecasts, with the best forecasts produced by the two
models which employ detruding processes appropriate for data which follow a random walk.

5
Chan, Lakonishok, & Swaminathan(2007)Analyzed on the Global Industry Classification
System (GICS) indicates that common movement in returns and operating performance resulting
from industry effects is stronger for stocks of large companies than for those of small companies.
Also, increasingly fine levels of disaggregation improve discrimination up to six-digit GICS
codes, after which the benefits tail off. Stock groupings based on industry exhibit stronger out-
of-sample homogeneity than groups formed from statistical cluster analysis.
Banz, (1981) showed the empirical relationships between the return and the total market value of
NYSE common stocks. The finding of this paper is that smaller firms have had higher risk
adjusted returns, on average, than larger firms. This size effect is existed for at least forty years
and is evidence that the capital asset pricing model is missing pacified. The size effect is not
linear in the market value; the main effect occurs for xiv very small firms while there is little
difference m return between average sized and large firms. It IS not known whether size per se is
responsible for the effect or whether size IS just a proxy for one or more true unknown factors
correlated with size.
Fama & French(2004) used the CAPM to measure the relation between expected return and
risk. Unfortunately, the empirical record of the model is poor—poor enough to invalidate the
way it is used in applications. The CAPM‘s empirical problems may reflect theoretical failings,
the result of many simplifying assumptions. But they may also be caused by difficulties in
implementing valid tests of the model. We begin by outlining the logic of the CAPM, focusing
on its predictions about risk and expected return.

6
Chapter Three
Description of VaR
How can an investor and a borrower estimate or understand that how many risks have to take or
how much money going to be losing. We know every investor and borrower take the risk of loss
for any investment. These types’ questions arise from their mind. For answering these types’
questions, knowing Value at Risk is important. . Value at Risk tries to provide these questions
answer, at least within a reasonable bound. In fact, it is misleading to consider Value at Risk, or
VaR as it is widely known, to be an alternative to risk adjusted value and probabilistic
approaches. After all, it borrows liberally from both. However, the wide use of VaR as a tool for
risk assessment, especially in financial service firms, and the extensive literature that has
developed around it, push us to dedicate this chapter to its examination.
What is Value at Risk?
In its most general form, the Value at Risk measures the potential loss in value of a risky asset or
portfolio over a defined period for a given confidence interval. Value at risk is associated with
the share price. It is based on past data. It calculates risk of share. VaR redirects here. For the
statistical technique VAR, see Vector auto regression. For the statistic denoted Var or var,
see Variance.
In financial mathematics and financial risk management, value at risk (VaR) is a widely used risk
measure of the risk of loss on a specific portfolio of financial assets. For a given
portfolio, probability and time horizon, VaR is defined as a threshold value such that the
probability that the mark-to-market loss on the portfolio over the given time horizon exceeds this
value (assuming normal markets and no trading in the portfolio) is the given probability level.

7
Figure 1 VaR Redirect
Source: http://www.r3analytics.com/blog/exposing_downsides_var/Varieties of VaR
The definition of VaR is no constructive; it specifies a property VaR must have, but not how to
compute VaR. Moreover, there is wide scope for interpretation in the definition. This has led to
two broad types of VaR, one used primarily in risk management and the other primarily for risk
measurement. The distinction is not sharp, however, and hybrid versions are typically used in
financial control, financial reporting and computing regulatory capital.
To a risk manager, VaR is a system, not a number. The system is run periodically (usually daily)
and the published number is compared to the computed price movement in opening positions
over the time horizon. There is never any subsequent adjustment to the published VaR, and there
is no distinction between VaR breaks caused by input errors (including Technology

8
breakdowns, fraud and rogue trading), computation errors (including failure to produce a VaR on
time) and market movements.
A frequents claim is made, that the long-term frequency of VaR breaks will equal the specified
probability, within the limits of sampling error, and that the VaR breaks will be independent in
time and independent of the level of VaR. This claim is validated by a back test, a comparison of
published VaRs to actual price movements. In this interpretation, many different systems could
produce VaRs with equally good back tests, but wide disagreements on daily VaR values.
VaR in Governance
VaR can also be applied to governance of endowments, trusts, and pension plans. Essentially
trustees adopt portfolio Values-at-Risk metrics for the entire pooled account and the diversified
parts individually managed. Instead of probability estimates they simply define maximum levels
of acceptable loss for each. Doing so provides an easy metric for oversight and adds
accountability as managers are then directed to manage, but with the additional constraint to
avoid losses within a defined risk parameter. VaR utilized in this manner adds relevance as well
as an easy way to monitor risk measurement control far more intuitive than Standard Deviation
of Return. Use of VaR in this context, as well as a worthwhile critique on board governance
practices as it relates to investment management oversight in general can be found in Best
Practices in Governance.
Mathematical Definition
Given a confidence level , the VaR of the portfolio at the confidence level is given
by the smallest number such that the probability that the loss exceeds is at most
Mathematically, if is the loss of a portfolio, then is the level -quintile,
i.e.

9
The left equality is a definition of VaR. The right equality assumes an underlying probability
distribution, which makes it true only for parametric VaR. Risk managers typically assume that
some fraction of the bad events will have undefined losses, either because markets are closed or
illiquid, or because the entity bearing the loss breaks apart or loses the ability to compute
accounts. Therefore, they do not accept results based on the assumption of a well-defined
probability distribution. Nassim Taleb has labeled this assumption, "charlatanism." On the other
hand, many academics prefer to assume a well-defined distribution, albeit usually one with fat
tails. This point has probably caused more contention among VaR theorists than any other.
Value of Risks can also be written as a distortion risk measure given by the distortion function
Risk measure and risk metric
The term "VaR" is used both for a risk measure and a risk metric. This sometimes leads to
confusion. Sources earlier than 1995 usually emphasize the risk measure, later sources are more
likely to emphasize the metric.
The VaR risk measure defines risk as mark-to-market loss on a fixed portfolio over a fixed time
horizon. There are many alternative risk measures in finance. Given the inability to use mark-to-
market (which uses market prices to define loss) for future performance, loss is often defined (as
a substitute) as change in fundamental value. For example, if an institution holds a loan that
declines in market price because interest rates go up, but has no change in cash flows or credit
quality, some systems do not recognize a loss. Also some try to incorporate the economic cost of
harm not measured in daily financial statements, such as loss of market confidence or employee
morale, impairment of brand names or lawsuits.

10
Rather than assuming a static portfolio over a fixed time horizon, some risks measures
incorporate the dynamic effect of expected trading (such as a stop loss order) and consider the
expected holding period of positions.
The VaR risk metric summarizes the distribution of possible losses by a quintile, a point with a
specified probability of greater losses. A common alternative metrics is expected shortfall.
VaR risk Management
Supporters of VaR-based risk management claim the first and possibly greatest benefit of VaR is
the improvement in systems and modeling it forces on an institution. In 1997,Philippe
Jorion wrote:
The greatest benefit of VAR lies in the imposition of a structured methodology for critically
thinking about risk. Institutions that go through the process of computing their VAR are forced to
confront their exposure to financial risks and to set up a proper risk management function. Thus
the process of getting to VAR may be as important as the number itself.
Publishing a daily number, on-time and with specified statistical properties holds every part of a
trading organization to a high objective standard. Robust backup systems and default
assumptions must be implemented. Positions that are reported, modeled or priced incorrectly
stand out, as do data feeds that are inaccurate or late and systems that are too-frequently down.
Anything that affects profit and loss that is left out of other reports will show up either in inflated
VaR or excessive VaR breaks. "A risk-taking institution that does not compute VaR might
escape disaster, but an institution that cannot compute VaR will not."
The second claimed benefit of VaR is that it separates risk into two regimes. Inside the VaR limit,
conventional statistical methods are reliable. Relatively short-term and specific data can be used
for analysis. Probability estimates are meaningful, because there are enough data to test them. In
a sense, there is no true risk because you have a sum of many independent observations with a
left bound on the outcome. A casino doesn't worry about whether red or black will come up on
the next roulette spin. Risk managers encourage productive risk-taking in this regime, because

11
there is little true cost. People tend to worry too much about these risks, because they happen
frequently, and not enough about what might happen on the worst days.
Outside the VaR limit, all bets are off. Risk should be analyzed with stress testing based on long-
term and broad market data. Probability statements are no longer meaningful. Knowing the
distribution of losses beyond the VaR point is both impossible and useless. The risk manager
should concentrate instead on making sure good plans are in place to limit the loss if possible,
and to survive the loss if not.
One specific system uses three regimes. One to three times VaR are normal occurrences. You
expect periodic VaR breaks. The loss distribution typically has fat tails, and you might get more
than one break in a short period of time. Moreover, markets may be abnormal and trading may
exacerbate losses, and you may take losses not measured in daily marks such as lawsuits, loss of
employee morale and market confidence and impairment of brand names. So an institution that
can't deal with three times VaR losses as routine events probably won't survive long enough to
put a VaR system in place.
Three to ten times VaR is the range for stress testing. Institutions should be confident they have
examined all the foreseeable events that will cause losses in this range, and are prepared to
survive them. These events are too rare to estimate probabilities reliably, so risk/return
calculations are useless.
Foreseeable events should not cause losses beyond ten times VaR. If they do they should
be hedged or insured, or the business plan should be changed to avoid them, or VaR should be
increased. It's hard to run a business if foreseeable losses are orders of magnitude larger than
very large everyday losses. It's hard to plan for these events, because they are out of scale with
daily experience. Of course there will be unforeseeable losses more than ten times VaR, but it's
pointless to anticipate them, you can't know much about them and it results in needless worrying.
Better to hope that the discipline of preparing for all foreseeable three-to-ten times VaR losses
will improve chances for surviving the unforeseen and larger losses that inevitably occur.
"A risk manager has two jobs: make people take more risk the 99% of the time it is safe to do so,
and survive the other 1% of the time. VaR is the border.

12
Computation Method
VaR can be estimated either parametrically (for example, variance-covariance VaR or delta-
gamma VaR) or non-parametrically (for examples, historical simulation VaR or resample VaR).
Nonparametric methods of VaR estimation are discussed in Markovich and Novak. A
comparison of alternative strategies for VaR prediction is given in Kuester et al.
A McKinsey report published in May 2012 estimated that 85% of large banks were
using historical simulation. The other 15% used Monte Carlo methods.
VaR, CVaR and EVaR
The VaR is not a coherent risk measure since it violates the sub-additively property, which is
However, it can be bounded by coherent risk measures like Conditional Value-at-Risk (CVaR)
or entropic value at risk (EVaR). In fact, for (with the set of allBoral measurable
functions whose moment-generating function exists for all positive real values) we have
Where
in which is the moment-generating function of at . In the above equations the
variable denotes the financial loss, rather than wealth as is typically the case.

13
Chapter Four
Banking Industry in Bangladesh
Bangladesh is a third world country with an under developed banking system, particularly in
terms of the services and customer care provided by the government run banks. Recently the
private banks are trying to imitate the banking structure of the more developed countries, but this
attempt is often foiled by inexpert or politically motivated government policies executed by the
central bank of Bangladesh, Bangladesh Bank. The outcome is a banking system fostering
corruption and illegal monetary activities/laundering etc. by the politically powerful and
criminals, while at the same time making the attainment of services or the performance of
international transactions difficult for the ordinary citizens, students studying abroad or through
distance learning, general customers etc..
History
The Pakistani banking system at independence (14 August 1947) consisted of two branch offices
of the former State Bank of Pakistan and seventeen large commercial banks, two of which were
controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There
were fourteen smaller commercial banks.
Beginning in late 1985, the government pursued a tight monetary policy aimed at limiting the
growth of domestic private credit and government borrowing from the banking system. The
policy was largely successful in reducing the growth of the money supply and total domestic
credit. Net credit to the government actually declined in FY 1986. The problem of credit
recovery remained a threat to monetary stability, responsible for serious resource misallocation
and harsh inequities. Although the government had begun effective measures to improve
financial discipline, the draconian contraction of credit availability contained the risk of
inadvertently discouraging new economic activity. Foreign exchange reserves at the end of FY
1986 were US$476 million, equivalent to slightly more than two months’ worth of imports. This
represented a 20-percent increase of reserves over the previous year, largely the result of higher

14
remittances by Bangladeshi workers abroad. The country also reduced imports by about 10
percent to US$2.4 billion. Because of Bangladesh's status as a least developed country receiving
concessional loans, private creditors accounted for only about 6 percent of outstanding public
debt. The external public debt was US$6.4 billion, and annual debt service payments were
US$467 million at the end of FY 1986.The commercial banking system dominates Bangladesh's
financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory
authority in the sector. The banking system is composed of four state-owned commercial banks,
five specialized banks, thirty eight private commercial banks, one land development bank and
nine foreign commercial banks. The Nobel-prize winning Grameen Bank is a specialized micro-
finance institution, which revolutionized the concept of micro-credit and contributed greatly
towards poverty reduction and the empowerment of women in Bangladesh.
Central bank: Bangladesh Bank
Pursuant to Bangladesh Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka
branch of the State Bank of Pakistan as the central bank of the country, and named it
Bangladesh with retrospective effect from 16 December 1971.
After the independence, banking industry in Bangladesh started its journey with 6 nationalized
commercialized banks, 2 State owned specialized banks and 3 Foreign Banks. In the 1980s
banking industry achieved significant expansion with the entrance of private banks. Now, banks
in Bangladesh are primarily of two types:
Scheduled Banks
The banks which get license to operate under Bank Company Act, 1991 (Amended in 2003) are
termed as Scheduled Banks. State-owned commercial banks, private commercial banks, Islamic
commercial banks, foreign commercial banks and some specialized banks are Scheduled Banks.
Non-Scheduled Banks
The banks which are established for special and definite objective and operate under the acts that
are enacted for meeting up those objectives, are termed as Non-Scheduled Banks. These banks
cannot perform all functions of scheduled banks. Grameen Bank, ProbashiKallyan
Bank, Karmasangsthan Bank, Progoti Co-operative Land Development Bank Limited (progoti
Bank) and Answer VDP Unnayan Bank are Non-Scheduled Banks.

15
State-owned commercial banks
State-owned are functioning as nationalist. Here is the list -
1. Sonali Bank
2. AgraniBank
3. Janata Bank
4. Rupali Bank
Private commercial banks
Private Banks are the highest growth sector due to the dismal performances of government banks
(above). They tend to offer better service and products. Here is the list -
1. NCC Bank Limited
2. AB Bank Limited
3. Bangladesh Commerce Bank Limited
4. Bank Asia limited
5. Brac Bank Limited
6. City bank Limited
7. Dhaka Bank Limited
8. Dutch Bangla Bank Limited
9. Eastern Bank Limited
10. Farmers Bank Limited
11. IFIF Bank Limited
12. Jamuna Bank Limited
13. Meghna Bank Limited
14. Mercantile Bank Limited
15. Midland Bank Limited

16
16. Modhumoti Bank Limited
17. Mutual Trust Bank Limited
18. National Bank Limited
19. NRB Bank Limited
20. NRB Commercial Bank Limited
21. NRB Global Bank Limited
22. One Bank Limited
23. Premier Bank Limited
24. Prime Bank Limited
25. Pubali Bank Limited
26. South Bangla Agriculture and Commerce Bank Limited
27. Southeast Bank Limited
28. Standard Bank Limited
29. Trust Bank
30. United Commercial Bank Limited
31. Uttara Bank Limited
Islamic Commercial Banks
There are 8 Islamic Commercial Banks. They are
1. Islami Bank Bangladesh limited (IBBL)
2. Shahjalal Islami bank limited (SIBL)
3. First Security Islami bank limited (FSIBL)
4. Export Import Bank of Bangladesh limited (EXIM Bank)
5. Al- Arafah Islami bank limited (Arafa Bank)
6. Social Islami Bank limited (SIBL)
7. ICB Islami Bank limited (ICB)
8. Union Islami Bank limited (UIBL)

17
Foreign commercial banks
9 foreign commercial banks are operating in Bangladesh. These are:
1. Citi Bank NA
2. HSBC
3. Standard Chartered Bank
4. Commercial Bank of Ceylon
5. State Bank of India
6. Habib Bank limited
7. National Bank of Pakistan
8. Woori Bank
9. Bank Alfalah
Specialized banks
Specialized Banks (SDBs): 4 specialized banks are now operating which were established for
specific objectives like agricultural or industrial development. These banks are also fully or
majorly owned by the Government of Bangladesh.
1. Bangladesh Krishi Bank
2. Rajshahi Krishi Unnayan Bank
3. Bangladesh Development Bank Ltd
4. BASIC Bank Limited
5. Probashi Kallyan Bank

18
Chapter Five
A Brief Review of Selected Banks
Bank is a financial institute. After the independence, banking industry in Bangladesh started its
journey with 6 nationalized commercialized banks, 2 State owned specialized banks and 3
Foreign Banks. In the 1980s banking industry achieved significant expansion with the entrance
of private banks. The commercial banking system dominates Bangladesh's financial
sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in
the sector. The banking system is composed of four state-owned commercial banks, five
specialized banks, thirty eight private commercial banks, one land development bank and nine
foreign commercial banks.
I choose three private commercial banks. They are detail bellow…

19
Islami Bank Bangladesh Limited
Islami bank Bangladesh limited (IBBL) was incorporated as the first Shariah based-interest free
Bank in south-east Asia on 13th
March 1983 as a Public
Company with limited liability under the company act,
1913 with 58.03% foreign shareholding having largest
branch network (236Branches & 30 SME/Krishi
Branches i.e. total 266 Branches) among the private
sector Banks in Bangladesh. The Bank started
functioning with effect from 13th
March 1983.The
establishment of this bank ushered a new area in
Bangladesh, The first branch of the bank i.e. local office, Motijheel, Dhaka. The bank was
formally inaugurated on 12th
August 1983.Islami Bank Bangladesh Limited is a Joint Venture
Public Limited Company engaged in commercial banking business based on Islamic Shari'ah
with) among the private sector Banks inBangladesh. It was established on the 13th March 1983
as the first Islamic Bank in the SoutheastAsia. It is listed with Dhaka Stock Exchange Ltd. and
Chittagong Stock Exchange Ltd. Authorized Capital of the Bank is Tk. 20,000.00 Million
($244.87 Million) and Paid-up Capital is Tk.10,007.71 Million ($122.53 Million) having 63,001
(30.06.2011) shareholders as on 31st
December 2011.
Mission
To establish Islamic Banking through the introduction of a welfare oriented banking system and
also ensure equity and justice in the field of all economic activities, achieve balanced growth and
equitable development in through diversified investment operations particularly in the priority
sectors and less developed areas of the country.
Vision
Our vision is to always strive to achieve superior financial performance, be considered a leading
Islamic Bank by reputation and performance.
Our goal is to establish and maintain the modern banking techniques, to ensure soundness and
development of the financial system based on Islamic principles and to become the strong and
efficient organization with highly motivated professional, working for the benefit of people,

20
based upon accountability, transparency and integrity in order to ensure stability of financial
systems.
We will try to encourage savings in the form of direct investment.
We will also try to encourage investment particularly in projects which are more likely to lead
to higher employment.
Strategic Objectives
To ensure customers' satisfaction.
To ensure welfare oriented banking.
To establish a set of managerial succession and adopting technological changes to ensure
successful development of an Islamic Bank as a stable financial institution.
To prioritize the clients welfare.
To emerge as a healthier & stronger bank at the top of the banking sector and continue
stable positions in ratings, based on the volume of quality assets.
To ensure diversification by Sector, Size, Economic purpose & geographical location
wise Investment and expansion need based Retail and SME/Women entrepreneur
financing.
To invest in the thrust and priority sectors of the economy.
To strive hard to become a employer of choice and nurturing & developing talent in a
performance-driven culture.
To pay more importance in human resources as well as financial capital.
To ensure lucrative career path, attractive facilities and excellent working environment.
To ensure zero tolerance on negligence in compliance issues both sharia’h and regulatory
issues.
To train & develop human resources continuously & provide adequate logistics to satisfy
customers’ need.
To be excellent in serving the cause of least developed community and area.
To motivate team members to take the ownership of every job.
To ensure development of devoted and satisfied human resources.
To encourage sound and pro-active future generation.
To achieve global standard.
To strengthen corporate culture.

21
To ensure Corporate Social Responsibilities (CSR) through all activities.
To promote using solar energy and green banking culture and ecological balancing.
Core Values
Trust in Almighty Allah
Strict observance of Islamic Shari’ah
Highest standard of Honesty, Integrity & Morale
Welfare Banking
Equity and Justice
Environmental Consciousness
Personalized Service
Adoption of Changed Technology
Proper Delegation, Transparency & Accountability
Commitments
To Shariah
To the Regulators
To the Shareholders
To the Community
To the Customers
To the Employees
To other stakeholders
To Environment
Source: http://www.islamibankbd.com/abtIBBL/abtIBBLAtaGlance.php

22
Achievements of Islami Bank Bangladesh Limited
Name of some awards as recognition of good performance IBBL
The institute of Chartered Accountants of Bangladesh (ICAB) awarded IBBL the first
prize of SARRC Anniversary Award for Corporate Governance.
South Asian Federation of Accountants (SAFA) awarded IBBL as joint Winner in the
Corporate Governance Disclosure Award-2010.
South Asian Federation of Accountants (SAFA) also awarded IBBL with Certificate of
Merit in Banking Sector in the Annual Report for the year 2010.
The Institute of Cost and Management Accountants of Bangladesh (ICMAB), awarded
IBBL as the ICMAB National Best Corporate Award-2007 (First Position, Local Bank)
and ICMAB Best Corporate Performance Award – 2008 (Second Position, Private
Commercial Bank).
The Institute of Chartered Accountants of Bangladesh (ICAB) awarded IBBL with 3rd
position under the catergory-1, banking in the best published accounts and reports for the
year 2010, the Certificate of Appreciation for the year 2001 & 2010 and Certificate of
Merit for the year 2008.
The Global Finance, a reputed U.S.A. based quarterly Financial Magazine, awarded
IBBL as the best Islamic Financial Institution of the country for the years 2008, 2009,
2010 & 2011. The Global Finance also awarded IBBL as the best bank of the country for
the year 1999, 2000, 2004 and 2005.
ICICI Bank, Hong Kong, awarded IBBL as “The Quality Recognition Award-2009” for
U.S. Dollar Clearing (2009).
Bankers’ Forum awarded IBBL as the Best Bank for Corporate Social Responsibility for
2008 and 2009.
The Bank-BimaPatrika, a Fortnightly Magazine, awarded IBBL as the Best Islami
Banking Award 2007.
Exclusive economic weekly “The Industry” awarded IBBL as the Best Rated Bank
Award-2010.
The Citi Bank NA awarded IBBL as the “Largest Contributor” in Foreign Trade
Operations in Europe- Bangladesh corridor in 2009.
The UAE Exchange awarded IBBL for mobilizing around 30% of total foreign
remittance of the country.
Source: http://www.islamibankbd.com/abtIBBL/abtIBBLPR.php

23
Jamuna Bank Limited
Jamuna Bank Limited is a private
commercial bank in Bangladesh. It
was established on June 3,
2001.Jamuna Bank has now in total of 83 branches as on April, 2013.Jamuna Bank Limited
(JBL) is a Banking Company registered under the Companies Act, 1994 of Bangladesh with its
Head Office currently at ChiniShilpaBhaban, 3, Dilkusha C/A, Dhaka-1000, Bangladesh. The
Bank started its operation from 3 June 2001.
Being a 3rd generation Bank of Bangladesh, it focuses on
Remaining with time
Managing change
Developing human capital
Creating true customer’s value
The Bank provides all types of support to trade, commerce, industry and overall business of the
country. JBL's finances are also available for the entrepreneurs to set up promising new ventures
and BMRE of existing industrial units. Jamuna Bank Ltd., the only Bengali named 3rd
generation private commercial bank, was established by a group of local entrepreneurs who are
well reputed in the field of trade, commerce, industry and business of the country.
The Bank offers both conventional and Islamic banking through designated branches. The Bank
is being managed and operated by a group of highly educated and professional team with
diversified experience in finance and banking. The Management of the bank constantly focuses
on understanding and anticipating customers' needs. Since the need of customers is changing day
by day with the changes of time, the bank endeavors its best to device strategies and introduce
new products to cope with the change. Jamuna Bank Ltd. has already achieved tremendous
progress within its past 10 years of operation. The bank has already built up reputation as one of
quality service providers of the country.

24
At present the Bank has real-time Online banking branches (of both Urban and Rural areas)
network throughout the country having smart IT-backbone. Besides traditional delivery points,
the bank has ATMs of its own, sharing with other partner banks and consortium throughout the
country.
Jamuna Bank’s Vision
To become a leading banking institution and toplay a significant role in the development of the
Bangladesh.
Jamuna Bank’s mission
The Bank is committed for satisfying diverse needs of its customers through an array of products
at a competitive price by using appropriate technology and providing timely service so that a
sustainable growth, reasonable return and contribution to the development of the country can be
ensured with a motivated and professional work-force.
Source: http://jamunabankbd.com/front/information/1/81

25
International Finance Investment and Commerce Bank Limited
(IFIC Bank Limited)
International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking company
incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the
instance of the Government in 1976 as a joint venture between the Government of Bangladesh
and sponsors in the private sector with the objective of working as a finance company within the
country and setting up joint venture banks/financial institutions aboard. In 1983 when the
Government allowed banks in the private sector, IFIC was converted into a full-fledged
commercial bank. The Government of the People’s Republic of Bangladesh now holds 32.75%
of the share capital of the Bank. Directors and Sponsors having vast experience in the field of
trade and commerce own 11.31% of the share capital and the rest is held by the general public.
Vision of IFIC bank Limited
At IFIC, we want to be the preferred financial service provider through innovative, sustainable
and inclusive growth and deliver the best in class value to all stakeholders.
Mission of IFIC Bank
The IFIC Bank Mission is to provide service to its clients with the help of a skilled and dedicated
workforce whose creative talents, innovative actions and competitive edge make our position
unique in giving quality service to all institutions and individuals that IFIC Bank care for.IFIC
Bank is committed to the welfare and economic prosperity of the people and the community, for
derive from them it’s inspiration and drive for onward progress to prosperity.IFIC Bank wants to
be the leader among banks in Bangladesh and make IFIC Bank indelible mark as an active
partner in regional banking operating beyond the national boundary. In an intensely competitive
and complex financial and business environment, we particularly focus on growth and
profitability of all concerned.
Source: http://www.ificbank.com.bd/about.php

26
Chapter Six
Performance analysis of Financial Data of IBBL, JBL and IFIC
The selected banks for Research Report has been listed in Table 1
Table 1: Name of Banks
IBBL Islami Bank Bangladesh Limited
IFIC International Finance Investment and Commerce Bank limited
Jamuna Jamuna Bank limited
In Table 2, Deposit Earning Ratio of the selected banks has been listed.
Table 2:DepositedEarning Ratio
Deposit Earning Ratio
Year IBBL IFIC Jamuna
2007 10.33 11.54 13
2008 10.56 11 13.07
2009 9.4 10.78 12.84
2010 7.91 9.98 15.42
2011 7.92 10.03 15.16
Mean 9.224 10.666 13.898
S.D 1.271428 0.663988 1.276762

27
Figure 2: Deposited Earning Ratio
Figure 02, presents Deposited Earning Ratio of selected three banks. Here the highest Deposited
Earning Ratio is scored forJamuna Bank limited at 13on 2010 and the lowest score is forIBBL at
7.91 on 2010. IFIC bank scored the average points.
In Table 3, Reveals Earning per Share and their Mean rates and standard Deviation of the
selected banks has been listed
Table 3: Earning Per Share
Earnings Per Share
Year IBBL IFIC JAMUNA
2007 3 7.19 3.65
2008 4.33 3.8 2.92
2009 4.59 4.13 5.67
2010 4.46 5.95 3.62
2011 4.84 2.58 0.73
Mean 4.244 4.73 3.318
SD 0.721 1.829 1.774
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011
DER
Deposite Earning Ratio
IBBL
IFIC
JAMUNA

28
Figure 3: Earning Per Share
In figure 02, depicts the earning per share of selected three banks respectively. The highest
earning per share scored IFIC banks on 2007 at 7.19 and the lowest score is for Jamuna bank on
2011 at 0.73. Standard Deviation (S.D) of Jamuna bank is also lower to the other banks. IBBL is
at the better position from the other banks.
Table 4, represent the Return on Asset of three banks and their Mean rates and standard
Deviation.
Table 4: Return on Asset
Return On Asset
2007 0.84 1.49 0.38
2008 1.27 1.64 1.65
2009 1.34 1.22 1.3
2010 1.47 1.1 1.8
2011 1.35 1.32 1.69
Mean
1.254 1.354 1.364
S.D
0.24 0.21 0.58
0
2
4
6
8
2007 2008 2009 2010 2011
EPS
Earning Per share
IBBL
IFIC
JAMUNA

29
Figure 4: Return on Asset
In figure 04, depicts the return on asset of selected three banks respectively. The highest earning
per share scored Jamuna bank on 2010 at 1.8 and the lowest score is for Jamuna bank also on
2007 at 0.38. Standard Deviation (S.D) of IFIC bank is lower to the other banks. IBBL is at the
better position from the other banks.
Table 5; represent the Price Earnings Ratio of three banks and their Mean rates and standard
Deviation.
Table 5:Price Earning Ratio
Price Earnings Ratio
2007 17.88 26.19 53.61
2008 10.78 18.81 9.02
2009 12.87 17.84 13.29
2010 13.29 24.26 18.82
2011 11.27 16.13 9.46
0
0.5
1
1.5
2
2007 2008 2009 2010 2011
RoA
Return On Asset
IBBL
IFIC
JAMUNA

30
Mean 13.218 20.646 20.84
S.D 2.81 4.34 18.74
Figure 5: Price Earning Ratio
In figure 05, show the Price Earnings Ratio of selected three banks respectively. The highest
price earnings ratio provides Jamuna bank on 2007 at 53.61 and next year the lowest score is for
Jamuna bank also on 2008 at 9.46. Standard Deviation (S.D) of IFIC bank is lower to the other
banks. IBBL is at the better position from the other banks.
Table 6, reveals the Net Asset Value per Share, Mean rates and standard deviation of selected
three banks.
Table 6: Net Asset Value Per Share
Net Asset Value Per Share
2007 23.6 38.97 25.5
2008 22.76 23.83 28.76
2009 27.23 24.07 25.44
2010 23.48 26.376 27.11
0
10
20
30
40
50
60
2007 2008 2009 2010 2011
PER
Price Earning Ratio
IBBL
IFIC
JAMUNA

31
2011 27.78 23.72 26.09
Mean 24.97 27.3932 26.58
S.D 2.344 6.563 1.391
Figure 6: Net Asset Value per Share
In figure 6, depicts the net asset value per share of selected banks. IFIC banks start well on 2007
at 38.97 then decline on next year 2008. But both IBBL and JBL performed average scored
during 5 years. And at the end of the year 2011, they are at same position.
0
5
10
15
20
25
30
35
40
45
2007 2008 2009 2010 2011
NAVPS
Net Asset value per Share
IBBL
IFIC
JAMUNA

32
ChapterSeven
VaR Analysis of selected Banks
Jamuna Bank Limited – 2009
In table 7, reveals the VaR analysis.
Table 7: VaRof Jamuna Bank Limited-2009
Figure7: Frequency Distribution of JBL- 2009
-20
0
20
40
60
80
100
120
0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00%
Frequcncy Distribution,JBL-2009
Frequcncy Distribution
Mean 0.004
S.D 0.054
10% lower risk return -0.064
Historical Data 242
10% in Var 24.2
24.2th Value -0.029
5% in Var 12.1
12.1th Value -0.041
Kurtosis 13.134
Skewness 0.144

33
Table & Figure7provides the mean value for Jamuna Bank Limited is 0.004 and standard
Deviation score is 0.054.According to normal distribution data 10% in VaR, I can say with 90%
confidence that the loss will be -0.064 and with 5% in VaR- I can say with 95% confidence the
loss will be -0.084. In Historical distribution I count242data and according to Historical Data At
10% in VaRresulted with a value of -0.029, it means that with 90% sure that are maximum lose
will be 0.029. This is different from normal distribution VaR. It means provably the return
distribution is not strictly normal. Comparing with 5% normal distribution VaR -0.084 and 5%
historical distribution VaR- -0.0408, there is some difference. According to Historical data,
Normal Distribution data is not normal.
For Normal distribution, the excess kurtosis should be 0 but here is not 0, here I have 13.134 and
its positive kurtosis, right tell does not have many values.Skewness of normal distribution data is
equal to 0, but this return distribution is slightly 0.144 positive squid. So I have deviated from
normality a little bit and that is why I can see little diverted from normal distribution VaR.
In Frequency Distribution, it is a bell shift curve, but I see the right till is hardly here. This line is
going to fell down street here. There is hardly any data in right till indicating positive kurtosis. It
is a slightly positive sequence. So this return distribution is not strictly normal that the historical
VaR result are slightly different from normal distribution VaR. Infect for the 5% VaR the
different is substantial -0.029 ( Normal) and -0.041 ( Historical).

34
IFIC BANK LIMITED
In table 8, reveals the VaR analysis.
Table 8: VaRof IFIC Bank Limited-2009
Mean 0.002
S.D 0.049
Historical Data 242
10% in VaR 24.2
24.2th Value -0.038
5% in VaR 12.1
12.1th Value -0.057
Kurtosis 8.281
Skewness 0.700
0
20
40
60
80
100
120
0.00% 50.00% 100.00% 150.00%
Frequency Distribution-IFIC Bank-2009
Frequency Destribution
Figure 8: Frequency Distribution of IFIC bank-2009

35
Table & Figure 8, represent the mean of IFIC Bank Limited is0.002 and standard Deviation is
0.049.According to normal distribution data 10% in VaR, I can say 90% confidently loss will be
-0.062, and 5% in VaR- I can say 95% confidently loss will be --0.0802.
In Historical distribution Data my Count Data is- 242 and according to Historical Data At 10% in
VaR is -0.038, it means 90% sure that are maximum lose will be 0.038. This is different from
normal distribution VaR. It means provably the return distribution is not strictly normal.
Comparing with 5% normal distribution VaR -0.084 and 5% historical distribution VaR-0.057,
there is some different. According to Historical Data, Normal Distribution Data is not normal.
For Normal distribution, the excess kurtosis should be 0 but here is not 0, here I have 8.281and
it's positive kurtosis, right tell does not have many values.
Skewness of normal distribution data is equal to 0, but this return distribution is slightly
0.700positive squid. So I have deviated from normality a little bit and that is why I can see little
diverted from normal distribution VaR.
different is substantial -0.081( Normal) and -0.057( Historical).

36
Islami Bank Bangladesh Limited
Table 9, represent the VaR analysis
Table 9: VaR of IBBL-2009
Mean 0.004
S.D 0.032
Historical Data 242
10% in Bar 24.2
24.2th Value -0.025
5th Value 12.1
12.1th Value -0.035
Kurtosis 16.938
Skewness -1.081
Figure 9: VaR of IBBL-2009
-20
0
20
40
60
80
100
120
0.00% 20.00% 40.00% 60.00% 80.00% 100.00%120.00%
Frequency Distribution,IBBL-2009
Frequency Distribution

37
Table & Figure 7,presentthe mean of Islami Bank Bangladesh Limited is 0.004and standard
Deviation is 0.032.According to normal distribution data 10% in VaR, I can say 90% confidently
loss will be -0.041, and 5% in VaR- I can say 95% confidently loss will be -0.053,
In Historical distribution Data my Count Data is- 242 and according to Historical Data At 10% in
VaR is -0.025, it means 90% sure that are maximum lose will be0.25. This is different from
normal distribution VaR. It means provably the return distribution is not strictly normal.
Comparing with 5% normal distribution VaR --0.053 and5% historical distribution VaR- 0.035,
there is some different. According to Historical Data, Normal Distribution Data is not normal.
For Normal distribution, the excess kurtosis should be 0 but here is not 0, here I have 16.94 and
it's positive kurtosis, right tell does not have many values.
Skewness of normal distribution data is equal to 0, but this return distribution is slightly -1.081
negative squid. So I have deviated from normality a little bit and that is why I can see little
diverted from normal distribution VaR.
different is substantial -0.053 ( Normal) and - 0.035( Historical).

38
Comparing VaRof these three Banks
Table 10 Comparing VaR Of Banks
Items JBL IFIC IBBL
Mean 0.004 0.002 0.004
S.D 0.054 0.049 0.032
10% lower risk return -0.064 -0.062 -0.041
5% lower risk return -0.084 -0.080 -0.053
24.2th Value -0.029 -0.037 -0.025
12.1th Value -0.029 -0.038 -0.025
Kurtosis 12.1 12.1 12.1
Skewness -0.041 -0.057 -0.035
Count 242 242 242
The mean of the daily returnsof selected banks are not equal. Table 10 presents the mean of JBL
& IBBL are both equal of a value of 0.004 but IFIC bank’s mean is slightly low from them.
Standard Deviation of JBL is higher than that of IFIC and IBBL. Standard Deviation presents the
standard value. So in this case IBBL scores the lowest standard deviation. According to normal
distribution data, with 90% confidence IBBL lose rate is low compared to IFIC bank and JBL.
As well as 95% confidence the low risk provides bank is IBBL. And the highest risk provides
bank is Jamuna bank Limited both 90% & 95% confidence. According to historical distribution
data, with 90% confidence, IBBL provides the lowest risk compared to other banks.According to
historical data, with 95% confidence IBBL gives the lowest losses. The kurtosis is equal to
selected three banks. IFIC bank provide the high skewness as well as IBBL provide the low
skewness. Using VaR I think IBBL is the best for invest from the other two banks. Because
IBBL provides the low risk in invest.

39
Conclusion
Islami Bank Bangladesh limited, Jamuna Bank Limited, International Finance Investment &
commerce Bank limited are new generation bank. They are committed to provide high quality
financial services/products to contribute to the growth of GDP of the country through stimulating
trade and commerce, accelerating the pace of industrialization, boosting up export, creating
employment opportunity for the educated youth, poverty alleviation, raising standard of living of
limited income group and overall sustainable socio-economic development of the country.
Though theyare new bank, Islami Bank Bangladesh limited, Jamuna Bank Limited, International
Finance Investment & commerce Bank limited make a strong position through the various
activities. Their number of clients, amount and investment money are increasing day by day.
Those banks already have shown impressive performance in investment.The bank has a vision to
be the best private commercial bank in Bangladesh in terms of efficiency, capital adequacy, asset
quality, sound management, etc. They are now one of the top most profitable private commercial
bank in the country. Consumers are more or less satisfied with the present services of the bank,
now should think to start new services and take different types of marketing strategy to get more
customers in this competition market of banking.On the other hand, they are facing several
competitions from other key players like Export Import bank Ltd., Social Investment Bank Ltd.,
Mercantile Bank Ltd., and Shahjalal Bank Ltd. At least it can be said that, Islami Bank
Bangladesh limited, Jamuna Bank Limited, International Finance Investment & commerce Bank
limited are growing fast and its contribution in our economies also considerable.

40
As a concluding remark, I would like to say that the bank has been able to attain a leading role
with 25 years of success story. But to remain unrivalled among other new generation banks, it
has to overcome the new challenges posed by them. They must also emphasize on the domestic
scenario more closely and analyze any certain trends and strategies of their competitors. The
bank must accept any failures and consider these as a persuasion to pursue future goals instead of
looking back on the failures and it must keep looking forward to playing an important role in our
economy.
I hope that Islami Bank Bangladesh limited, Jamuna Bank Limited, International Finance
Investment & commerce Bank limited will expand its products/service by expanding its branch
all over the country.

i
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Islami Bank Bangladesh Limited, 2016, Mission and Vision,[online]available
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ii
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Limited
Limited
Limited
Limited
Limited

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