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Title:Managing adverse dependence for portfolios of collateral in financial infrastructures PDF Logo
Authors:García, Alejandro
Gençay, Ramazan
Issue Date:2007
Series/Report no.:Bank of Canada Working Paper 2007,25
Abstract:We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs. This framework permits us to quantify the potential impact on the portfolio returns of systemic events that change, or break down, the historical comovement structure, imposing an adverse extreme dependence.We illustrate our framework using securities pledged as collateral in the Canadian securities clearing and settlement system.
Subjects:Econometric and statistical methods
Financial markets
Financial stability
JEL:G00
G10
C10
Document Type:Working Paper
Appears in Collections:Bank of Canada Working Papers

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