Generating Interest Rate Stress Scenarios
Main Article Content
Abstract
This article describes the use of the Heath-Jarrow-Morton framework to generate stress scenarios for the term structure of the interest rate. By means of principal component analysis it is possible to reduce the dimensions of the problem and create a bridge between the information a specialist possesses for defining scenarios, such information generally being of low dimensions, and the robustness of the HJM model. The methodology is applied to Brazilian Market data during the market meltdown in 2008 and from other occasions.
Article Details
Issue
Section
Long Paper
Authors that publish in the Brazilian Review of Finance agree with the following terms:
Authors maintain their moral rights and grant to Review the copyright and the first publication right with their work simultaneously licensed under a Creative Commons Attribution 3.0 License that allows the total or partial copy of the work, including for commercial use, and sharing of the work with recognition of its authors and the initial publication in this journal.
Authors are allowed to take additional contracts separately for non-exclusive distribution of the paper published in this journal (eg, in institutional repositories or to publish as a book chapter), with recognition of its authors and the initial publication in this journal.
Authors are permitted and encouraged to post their work online (eg, in institutional repositories or on their website) at any point before or during the submission process, as this can lead to productive exchanges, as well as increase the impact and citation of the published work.
The contents of the signed articles are the sole responsibility of the authors, remains their responsibility even after the transfer of the copyright. The Review reserves the right to make normative, spelling and grammar changes in the original article in order to maintain the linguistic standards, but will follow the style of the authors. RBFin also reserves the right to translate the article into another language. RBFin may impose a copyright transfer form as a condition for publishing the article.
