Value at Risk (VaR) and its application in structural interest risk measurement

Abstract

This article aims to provide alternatives that improve the regulatory methodology for measuring structural interest risk for economic value. To do this, the various existing models used to measure structural interest rate risk for economic value are explored, the different metrics resulting from these models are calculated for the fifteen banks of the Peruvian financial system, and the regulatory methodolo gy is compared with the methodology Value at Risk (for the calculation of economic capital for structural interest rate risk), both in results and in procedures, evaluating the possible shortcomings that can be found in the regulatory model, as well as the possible advantages that the Value at Risk methodology of Structural interest rate risk measurement for economic value. For this reason, alternatives for improving the regulatory methodology are proposed, which are based on the search for accuracy in the distribution by maturity tranches of the balance sheet headings, the best accuracy of certain types of flows, more acidic measurements, analysis (stress scenarios, contingency plans) and the use of Value at Risk to measure economic capital for structural interest rate risk.