Value at risk for the term structure of interest rates : an orthogonal approach

Value at Risk is the maximum potential loss of a portfolio with a given probability during a period of time. This tool is extremely useful for hedging portfolio decisions as making efficient strategies by controlling for the incremental risk. The principal challenge of this risk measure is the accur...

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Autores:
López Reina, Diego Nicolás
Tipo de recurso:
Trabajo de grado de pregrado
Fecha de publicación:
2006
Institución:
Universidad de los Andes
Repositorio:
Séneca: repositorio Uniandes
Idioma:
eng
OAI Identifier:
oai:repositorio.uniandes.edu.co:1992/22595
Acceso en línea:
http://hdl.handle.net/1992/22595
Palabra clave:
Riesgo (Finanzas) - Investigaciones - Modelos econométricos
Administración de riesgos - Investigaciones
Valor en riesgo - Modelos matemáticos
Administración
Rights
openAccess
License
http://creativecommons.org/licenses/by-nc-nd/4.0/
Description
Summary:Value at Risk is the maximum potential loss of a portfolio with a given probability during a period of time. This tool is extremely useful for hedging portfolio decisions as making efficient strategies by controlling for the incremental risk. The principal challenge of this risk measure is the accuracy of the loss estimation which depends on the particular model used. In this sense, the main objective of this paper is to present an adequate methodology in order to measure market risk for fixed income portfolios. It evaluates risk related to the yield curve in time by using Principal Components Analysis, Orthogonal Garch and Key Rates Durations. Using dynamic conditional correlations as the simulation under stress scenarios let ensure a Value at Risk. Models output generate dynamic hedging strategies as portfolio management in a coherent way fitting positions taken in the market.