Title

Interest rate term structure dynamics using PCA and GARCH models with application to the Philippine government curve

Date of Publication

2005

Document Type

Dissertation

Degree Name

Doctor of Business Administration

College

Ramon V. Del Rosario College of Business

Department/Unit

Management and Organization Department

Thesis Adviser

Santos, Rhoderick R.

Defense Panel Chair

Vital, Villamor G.

Defense Panel Member

Bersales, Lisa Grace S.
Divinagracia, Ma. Rochelle G.

Abstract/Summary

The Basle II Accord motivates a study of permissible internal models which can potentially decrease risk capital requirements. A PCA-GARCH interest rate risk model is considered. PCA is introduced to reduce dimensionality in the Philippine Government Curve. Volatility dynamics are modeled using different GARCH extensions. Finally, the selected PCA-GARCH model is tested under the Basle framework for market risk, using a representative fixed-income portfolio. Research findings show that a PCA-GARCH specified model can adequately capture the volatility dynamics in term structure of Philippine interest rates using two principal components and shows significant potential as an internal model for Value-at-Risk and Market Risk Capital under the Basle standard.

Abstract Format

html

Format

Electronic

Accession Number

CDTG003982

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

1 computer optical disc ; 4 3/4 in.

Keywords

Interest rates -- Mathematical models

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