An Analysis of the Volatility of the Chilean Sovereign Bond

Authors

Keywords:

value at risk, liquidity risk, sovereign bond, bid-ask spread, Chile

Abstract

International capital market integration together with increasing international volatility, requires an accurate evaluation of the potential losses that portfolio managers may face as a result of international turbulence. Assets with high liquidity standards can be evaluated by the traditional Value at Risk approach (VaR), however, this statistic underestimates the true value of the potential losses when the instrument is not liquid. This paper applies the methodology of liquidity adjusted VaR to the Chilean sovereign bond by incorporating bid-ask spread fluctuations when evaluating a portfolio risk.

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Author Biography

Christian A. Johnson, Banco Central de Chile

División de Estudios. Banco Central de Chile

References

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Published

2001-04-30

How to Cite

Johnson, C. A. (2001). An Analysis of the Volatility of the Chilean Sovereign Bond. Economic Analysis Review, 16(1), 83–97. Retrieved from https://www.rae-ear.org/index.php/rae/article/view/3

Issue

Vol. 16 No. 1 (2001)

Section

Articles

License

Copyright (c) 2001 Christian A. Johnson

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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