Variance Reduction technique for calculating value at risk in fixed income portfolios

Título inglés	Variance Reduction technique for calculating value at risk in fixed income portfolios
Autor/es	Pilar Abad ; Sonia Benito
Revista	1696-2281
Publicación	2010, 34 (1): 21-44
Tipo de documento	articulo
Idioma	Inglés
Resumen inglés	Financial institutions and regulators increasingly use Value at Risk (VaR) as a standard measure for market risk. Thus, a growing amount of innovative VaR methodologies is being developed by researchers in order to improve the performance of traditional techniques. A variance-covariance approach for ?xed income portfolios requires an estimate of the variance-covariance matrix of the interest rates that determine its value. We propose an innovative methodology to simplify the calculation of this matrix. Specifically, we assume the underlying interest rates parameterization found in the model proposed by Nelson and Siegel (1987) to estimate the yield curve. As this paper shows, our VaR calculating methodology provides a more accurate measure of risk compared to other parametric methods.
Palabras clave inglés	Value at Risk, Fixed Income Portfolios, Market risk, Nelson and Siegel model.
Acceso al artículo completo