Exchange Rate Risk Exposure Related to Public Debt Portfolio of Pakistan: Application of Value-at-Risk Approaches

Farhan Akbar and Thierry Chauveau ()
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Farhan Akbar: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Thierry Chauveau: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The study analyzes exchange rate risk related to three currencies i.e. euro, US dollar and Japanese yen on Public Debt Portfolio of Pakistan (PDPP) through value-at-risk (VAR) methodology for period 2001 to 2006. It is found that Pakistan's public debt management with respect to exchange rate exposure lacks hedging strategy. This is evident from the fact that none of the currencies constituting PDPP has negative beta or negative component VAR. Beta and Marginal VAR analysis reveal that individually dollar is the least risky and Japanese yen as the most risky currency constituting PDPP. The lack of hedging strategy, revealed by beta and component VAR analysis has also been confirmed by the best hedge analysis.

Keywords: value-at-risk; public debt management; exchange rate risk (search for similar items in EconPapers)
Date: 2009
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Published in State Bank of Pakistan Research Bulletin, 2009, 5 (2), pp.15-33

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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-00649101

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