Comparative Analysis of VaR Models Aplicability in the Evaluation of Exchange Rate Risk in the B&H Banking Sector

Emina Kozarevic
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Emina Kozarevic: University of Tuzla, Faculty of Economics

Economic Analysis, 2010, vol. 43, issue 3-4, 29-41

Abstract: In this paper the author tests a variety of market VaR models for evaluation of exposure to exchange rate risk, in order to illuminate the advantages and disadvantages of their implementation in the B&H banking sector. As known, B&H monetary policy operates on the basis of currency board arrangement. The selection of a particular VaR model is determined with the fact that income generated from taking the risk should always exceed the cost of keeping capital reserves needed to cover taken risks. In the concrete bank three VaR models are applied and comparation of the results is done.

Keywords: Eexchange rate risk; evaluation; bootstrapping; RiskMetricsTM; Monte Carlo simulation for VaR (search for similar items in EconPapers)
JEL-codes: C15 C19 G21 G29 (search for similar items in EconPapers)
Date: 2010
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