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The consequences of the dynamics in the term structure of interest rates for risk management by banks: an analysis of value-at-risk models

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Author Info
P.J.G. Vlaar

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Abstract

This study investigates the consequences of dynamics in the term structure of Dutch interest rates for the accurateness of value-at-risk models. Therefore, value-at-risk measures are calculated using historical simulation, variance-covariance and Monte Carlo simulation methods. For a ten days holding period, the best results were obtained for a combined variance-covariance Monte Carlo method using a term structure model with a normal distribution and GARCH specification. Term structure models with a t-distribution or with cointegration performed much worse.

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Publisher Info
Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 512.

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Date of creation: 1997
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Handle: RePEc:dnb:wormem:512

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