When developing the Market Model for Indonesian Bond Market we base on the lists of macro economic indicators, corporate finance concept and a processed statistics data available from many reliable sources. As we are dealing with risk-return trade- off, therefore Security Market Line (SML) is the most logical concept to be implemented. The SML is constructed from the riskless point of investment and the market risk with beta equal to one. The model rests on the argument to use the proper and relevant assumptions in deriving the Risk and Return profile for the Bond Market. Once the risk-return profile for each projected year is determined, the propensity from Time Deposits to Bond would be defined when the profile is above the SML line. In turn, by doing regression analysis to the selected data and relating the Security Market Line Concept with the processed statistics, the projected figures of Bond Market in Indonesia will then be estimated, for Base, Worst and Best scenarios. Finally, in the following chapter, using Value At Risk (VAR) Model, we estimate the Business shares for Underwriting, Trading and Investment suitable for ABN-AMRO Bank (The company).

The Indonesian Bond Market projection suggest that there will be a strong growth in bond market in Indonesia, mostly due to the betterment of economic condition and the improvement of the bond market infrastructure.



Reseach Location: BES, PEFINDO, Danareksa Sekuritas, Danareksa Fund Management, Panin Sekuritas, Lippo Securities, etc.



Supervisor: Roy Sembel, Ph.D.

Accepted: 30 November 1999.



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