A Probability-Based Stress Test of Federal Reserve Assets and Income
Jens H. E. Christensen,
Jose Lopez () and
Glenn Rudebusch ()
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Jens H. E. Christensen: Federal Reserve Bank of San Francisco
Working Papers from University of Pennsylvania, Wharton School, Weiss Center
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.
JEL-codes: E43 E52 E58 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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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:ecl:upafin:14-01
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