Advanced Search
MyIDEAS: Login to save this paper or follow this series

A New Proposal for Collection and Generation of Information on Financial Institutions' Risk: the case of derivatives

Contents:

Author Info

  • Gilneu F. A. Vivan
  • Benjamin M. Tabak

Abstract

This article aims at providing a new alternative for the collection of information on risks taken by financial institutions, which enables the calculation of risk tools usually used in risk management, such as VaR and stress tests. This approach should help risk managers, off-site supervision and academics in assessing the potential risks in financial institutions principally due to derivatives positions. The basic idea, for linear financial instruments, like the traditionally used by the management risk systems, is to reduce positions in risk factors and then mapping by vertices. For the nonlinear financial instruments all of the positions in different types of options – European, Americans, exotic, etc.– are represented as plain vanilla European options or replicated by portfolios of plain vanilla European options. The methodology was applied to Brazil, within the worst scenarios during the period from 1994 to 2004, and the paper demonstrates that the proposed approach captured the risks satisfactorily in the analyzed portfolios, including the risk existent in the strategies involving options, given an accepted error margin. This approach could be useful for regulators, risk managers; financial institutions and risk management modeling as it can be used as an input in general risk management models.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bcb.gov.br/pec/wps/ingl/wps133.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 133.

as in new window
Length:
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:bcb:wpaper:133

Contact details of provider:
Web page: http://www.bcb.gov.br/?english

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Leonardo Soriano de Alencar & Márcio I. Nakane, 2003. "Real Balances in the Utility Function: Evidence for Brazil," Working Papers Series 68, Central Bank of Brazil, Research Department.
  2. Eduardo Lundberg, 2000. "Monetary Policy and Banking Supervision Functions on the Central Bank," Working Papers Series 2, Central Bank of Brazil, Research Department.
  3. Mauricio S. Bugarin & Fabia A. de Carvalho, 2005. "Comment on ‘Market discipline and monetary policy’ by Carl Walsh," Oxford Economic Papers, Oxford University Press, vol. 57(4), pages 732-739, October.
  4. Sergio A. Lago Alves & Mirta N. S. Bugarin, 2006. "The Role of Consumer's Risk Aversion on Price Rigidity," Working Papers Series 121, Central Bank of Brazil, Research Department.
  5. Márcio I. Nakane & Leonardo S. Alencar & Fabio Kanczuk, 2006. "Demand for Bank Services and Market Power in Brazilian Banking," Working Papers Series 107, Central Bank of Brazil, Research Department.
  6. Marcelo Kfoury Muinhos & Sergio Afonso Lago Alves, 2003. "Medium-Size Macroeconomic Model for the Brazilian Economy," Working Papers Series 64, Central Bank of Brazil, Research Department.
  7. Arnildo da Silva Correa & André Minella, 2006. "Nonlinear Mechanisms of the Exchange Rate Pass-Through: a Phillips curve model with threshold for Brazil," Working Papers Series 122, Central Bank of Brazil, Research Department.
  8. José L. B. Fernandes & Augusto Hasman & Juan Ignacio Peña, 2006. "Risk Premium: Insights Over The Threshold," Working Papers Series 126, Central Bank of Brazil, Research Department.
  9. Eduardo J. A. Lima & Felipe Luduvice & Benjamin M. Tabak, 2006. "Forecasting Interest Rates: an application for Brazil," Working Papers Series 120, Central Bank of Brazil, Research Department.
  10. Alexandre A. Tombini & Sergio A. Lago Alves, 2006. "The Recent Brazilian Disinflation Process and Costs," Working Papers Series 109, Central Bank of Brazil, Research Department.
  11. Aloisio Araujo & Marcia Leon, 2002. "Speculative Attacks on Debts, Dollarization and Optimum Currency Areas," Working Papers Series 40, Central Bank of Brazil, Research Department.
  12. Ricardo Schechtman & Valéria Salomão Garcia & Sergio Mikio Koyama & Guilherme Cronemberger Parente, 2004. "Credit Risk Measurement and the Regulation of Bank Capital and Provision Requirements in Brazil - A Corporate Analysis," Working Papers Series 91, Central Bank of Brazil, Research Department.
  13. Eui Jung Chang & Marcelo Kfoury Muinhos & Joanílio Rodolpho Teixeira, 2002. "Macroeconomic Coordination and Inflation Targeting in a Two-Country Model," Working Papers Series 50, Central Bank of Brazil, Research Department.
  14. Sergio A. L. Alves & Waldyr D. Areosa, 2005. "Targets and Inflation Dynamics," Working Papers Series 100, Central Bank of Brazil, Research Department.
  15. Fajardo, J. & Farias, A., 2003. "Generalized Hyperbolic Distributions and Brazilian Data," Finance Lab Working Papers flwp_57, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  16. Emanuel-Werner Kohlscheen, 2000. "Estimating Exchange Market Pressure and Intervention Activity," Working Papers Series 9, Central Bank of Brazil, Research Department.
  17. Marcelle Chauvet, 2000. "Leading Indicators of Inflation for Brazil," Working Papers Series 7, Central Bank of Brazil, Research Department.
  18. Francisco Marcos R. Figueiredo & Thaís Porto Ferreira, 2002. "Os Preços Administrados e a Inflação no Brasil," Working Papers Series 59, Central Bank of Brazil, Research Department.
  19. Araújo, Aloísio Pessoa de & Leon, Márcia Saraiva, 2003. "Speculative attacks on debts and optimum currency area: A welfare analysis," Economics Working Papers (Ensaios Economicos da EPGE) 514, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  20. Sergio R. S. Souza & Benjamin M. Tabak & Daniel O. Cajueiro, 2008. "Long-Range Dependence In Exchange Rates: The Case Of The European Monetary System," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 199-223.
  21. Ryan A. Compton & Jose Ricardo da Costa e Silva, 2005. "Finance and the Business Cycle: a Kalman Filter Approach with Markov Switching," Working Papers Series 97, Central Bank of Brazil, Research Department.
  22. Marta Areosa & Waldyr Areosa, 2006. "The Inequality Channel of Monetary Transmission," Working Papers Series 114, Central Bank of Brazil, Research Department.
  23. Pedro H. Albuquerque, 2000. "An Information Theory Approach to the Aggregation of Log-Linear Models," Working Papers Series 4, Central Bank of Brazil, Research Department.
  24. Sergio Afonso Lago Alves, 2001. "Evaluation of the Central Bank of Brazil Structural Model's Inflation Forecasts in an Inflation Targeting Framework," Working Papers Series 16, Central Bank of Brazil, Research Department.
  25. Benjamin Miranda Tabak & Solange Maria Guerra, 2002. "Stock Returns and Volatility," Working Papers Series 54, Central Bank of Brazil, Research Department.
  26. Sergio R.S. Souza & Benjamin M. Tabak & Daniel O. Cajueiro, 2006. "Investigação da Memória de Longo Prazo na Taxa de Câmbio no Brasil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(2), pages 193-209, November.
  27. Ricardo Schechtman, 2006. "Uma Investigação Baseada em Reamostragem sobre Requerimentos de Capital para Risco de Crédito no Brasil," Working Papers Series 127, Central Bank of Brazil, Research Department.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:133. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francisco Marcos Rodrigues Figueiredo).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.