Value at risk and dynamic hedge allocation strategy to strengthen socio-economic resilience and business funds

¹ Department of Management, Faculty of Economic and Management, Bogor Agricultural University, Indonesia.
² Department of Syariah Economics, Faculty of Economics and Management, Bogor Agricultural University, Indonesia.

^* Corresponding author: abdullahbasuki@apps.ipb.ac.id

Abstract

The urgency to manage asset allocation focusing on sustainable growth and resilience to various socio-economic conditions has become a primary objective across all business sectors, including agriculture, forestry, fisheries, and biodiversity. This study identifies a resilient investment model by illustrating how to improve financial health, promote sustainable business fund value, and achieve the best long-term financial community resilience performance. The data used in this study consists of marketable security data. The observation period was from 2018 to 2024. The analysis during the Covid-19 crisis shows that the Indonesia Composite Index, based on the VaR measurement, the IHSG closing price of 3,938 corresponds to a confidence level of 0.0035 %. In comparison, the maximum expected loss at the 1 % confidence level was 4,976. When implementing a dynamic hedging strategy, losses from the lowest point of 3,938 could be limited to 4,747, a difference of 810 points. The systematic risk caused by volatility was also successfully reduced from 1.69 % to 0.93 %. This study concludes that VaR can be used to recommend positions for asset allocations. Additionally, implementing portfolio insurance strategies has proven effective in reducing the risk of fluctuations, particularly during crises and financial disasters.