IDEAS home Printed from https://ideas.repec.org/p/bca/bocawp/07-25.html
   My bibliography  Save this paper

Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures

Author

Listed:
  • Alejandro García
  • Ramazan Gençay

Abstract

We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs. This framework permits us to quantify the potential impact on the portfolio returns of systemic events that change, or 'break down', the historical comovement structure, imposing an adverse extreme dependence.We illustrate our framework using securities pledged as collateral in the Canadian securities clearing and settlement system.

Suggested Citation

  • Alejandro García & Ramazan Gençay, 2007. "Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures," Staff Working Papers 07-25, Bank of Canada.
  • Handle: RePEc:bca:bocawp:07-25
    as

    Download full text from publisher

    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/03/wp07-25.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bouye, Eric & Durlleman, Valdo & Nikeghbali, Ashkan & Riboulet, Gaël & Roncalli, Thierry, 2000. "Copulas for finance," MPRA Paper 37359, University Library of Munich, Germany.
    2. Nicholas Chan & Mila Getmansky & Shane M. Haas & Andrew W. Lo, 2007. "Systemic Risk and Hedge Funds," NBER Chapters,in: The Risks of Financial Institutions, pages 235-338 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Econometric and statistical methods; Financial markets; Financial stability;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:07-25. 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: (). General contact details of provider: http://www.bank-banque-canada.ca/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.