The Generation and Analysis of the Interest Rate Shock Scenarios Using DNS Model
DOI :10.23842/jif.2019.30.2.001
Publisher : Korea Insurance Research Institute
Research Area : Business Management
Tae HyeonWuk 1 , Geonyoup Noh 2 , Kim Byung-June 3 , Jang Bong-Gyu 4 , Kyoung Gook Park 5
1
포항공과대학교
2
보험개발원
3
포항공과대학교
4
포항공과대학교
5
금융감독원
-
We use the Dynamic Nelson-Siegel model (DNS) to simulate interest rate shocks and analyze how they affect the term structure of interest rates. We generate scenarios of the interest rate shocks following the suggestion of ICS: mean-reversion, level-up and down, twist-up and down shocks. Sensitivity analysis is also conducted on various parameter assumptions. We find that each scenario gives a various impact on the term structure. Therefore, it is necessary to cope with risk factors of interest rate shocks. Moreover, we analyze the difference in the interest rate shock scenarios between PCA and DNS. It will be necessary to select a model suitable for the domestic environment through various analyses and comparisons of interest rate risk models.
413
Viewed
Print this page
Download PDF