Journal of Banking & Finance Vol. 24 No. 12 2000
A synthetic factor approach to the estimation of value-at-risk of a portfolio of interest rate swaps
Abstract
In this paper we decompose the interest rate swap yield curves of 10 major currencies into their common factors and find that the first two factors, interpreted as parallel shift and rotation, explain between 97.1% and 98.6% of the variation in the interest rate swap rates across all 10 currencies. The main contribution of the paper however is that we then model these two factors as simplified synthetic factors so that they may be used to develop an innovative approach to the computation of Value-at-Risk (VaR) for a portfolio of interest rate swaps.
- DOI
- 10.1016/s0378-4266(99)00119-3
- Volume
- 24
- Issue
- 12
- Pages
- 1903-1932
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref