Assessing the accuracy of delta-normal VaR evaluation for Serbian government bond portfolio

Milica Obadović, Evica Petrović, Nenad Vunjak and Mirjana Ilić

Economic Research-Ekonomska Istraživanja, 2016, vol. 29, issue 1, 475-484

Abstract: Interest rate risk is immanent to all sorts of bonds with a fixed interest rate and has a major impact on the value of the bond. The aim of this article is to evaluate this risk over a period of five years (2008–2012), applying the delta-normal Value-at-Risk (VaR) method to a portfolio consisting of bonds that were continuously traded at the Belgrade Stock Exchange and to assess the accuracy of the method for different confidence levels in that period. The results demonstrated that the method underestimated the risk for the confidence levels of 99.5% and 99% and overestimated the risk for the confidence level of 90%.

Date: 2016
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DOI: 10.1080/1331677X.2016.1174391

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