A Probability-Based Stress Test of Federal Reserve Assets and Income

Jens Christensen, Jose Lopez and Glenn Rudebusch

No 2013-38, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: To support the economy, the Federal Reserve amassed a large portfolio of long-term bonds. We assess the Fed?s associated interest rate risk ? including potential losses to its Treasury securities holdings and declines in remittances to the Treasury. Unlike past examinations of this interest rate risk, we attach probabilities to alternative interest rate scenarios. These probabilities are obtained from a dynamic term structure model that respects the zero lower bound on yields. The resulting probability-based stress test finds that the Fed?s losses are unlikely to be large and remittances are unlikely to exhibit more than a brief cessation.

Keywords: term structure modeling; zero lower bound; monetary policy; quantitative easing (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G12 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-12-16
New Economics Papers: this item is included in nep-mac, nep-mon and nep-rmg
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: A probability-based stress test of Federal Reserve assets and income (2015)
Working Paper: A Probability-Based Stress Test of Federal Reserve Assets and Income (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2013-38

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DOI: 10.24148/wp2013-38

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