Volatility and market risk: Value-at-Risk (VaR) applied to the GOBIXDR index

What it is about

Research on the market risk of government bonds issued and traded in the local market, using the GOBIXDR index as a benchmark. Volatility is used to assess the performance of portfolios and investment strategies and to price the capital consumption of exposures.

The GARCH methodology is used to find the optimal model, then test and validate it; value at risk (VaR) is quantified with filtered historical simulation and the Monte Carlo method; capital consumption is estimated for trading, available-for-sale and held-to-maturity portfolios; and, trained on 2022 data, the Stress-VaR scenario is presented. The results apply to trading risk management and to the management of the equity position.