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

Wetenschappelijke publicatie
Date 6 September 1997

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.