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A risk analysis proposition for fixed income securities

Managing financial risk continues to be an integral part of assessing financial instrument performance. It is important to note that many empirical studies have looked on factors such as total risk and diversifiable risk or even beta, standard deviation and variance as risk representation. Due to th...

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Main Authors:	Zatul Karamah Ahmad Baharul Ulum, Anis Suhaila Anas, Azwan Abdullah, Zaminor Zamzamir@Zamzamin, Siti Salwani Abdullah, Suraya Mahmood
Format:	Book Section
Language:	English
Published:	Faculty of Entrepreneurship and Business,UMK 2015
Online Access:	http://discol.umk.edu.my/id/eprint/8579/1/Conference%20Paper%2034%20%20ISEB%202015.pdf http://discol.umk.edu.my/id/eprint/8579/
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id	my.umk.eprints.8579
record_format	eprints
spelling	my.umk.eprints.85792022-05-23T14:20:23Z http://discol.umk.edu.my/id/eprint/8579/ A risk analysis proposition for fixed income securities Zatul Karamah Ahmad Baharul Ulum Anis Suhaila Anas Azwan Abdullah Zaminor Zamzamir@Zamzamin Siti Salwani Abdullah Suraya Mahmood Managing financial risk continues to be an integral part of assessing financial instrument performance. It is important to note that many empirical studies have looked on factors such as total risk and diversifiable risk or even beta, standard deviation and variance as risk representation. Due to the urgent need for a single risk measure, Value-at-Risk (VaR) has attained more demand in replacing standard deviation or volatility as the most widely used risk measure. However, VaR has so far not been exploited extensively in explaining fixed income financial risk within specific parameters, assumptions and data characteristics. In addition, most literature with regards to the usage of VaR has associated the measure with the assumption of normal distribution. Maintaining a normality assumption and failure to account for any financial time series imperfection will undoubtedly lead to underestimating or overestimating VaR and should the risk of heavy-tailed events fail to be quantified, the financial distress implications of trader’s actions will not be captured accurately. This paper highlights the proposition to fill the gap in the knowledge of financial risk measures by adding a new parameter dimension to the quantification of VaR for fixed income securities. This will be done by extending the measure through the inclusion of several volatility models under a different assumption of return distribution. The new dimension includes associating VaR estimation based on Bayesian distribution. Within this new parameter dimension, the financial risk modelling for the fixed income securities should be able to portray the actual traits of the return thus providing more accurate financial risk estimation Faculty of Entrepreneurship and Business,UMK 2015 Book Section NonPeerReviewed text en http://discol.umk.edu.my/id/eprint/8579/1/Conference%20Paper%2034%20%20ISEB%202015.pdf Zatul Karamah Ahmad Baharul Ulum and Anis Suhaila Anas and Azwan Abdullah and Zaminor Zamzamir@Zamzamin and Siti Salwani Abdullah and Suraya Mahmood (2015) A risk analysis proposition for fixed income securities. In: The Proceedings of The 4th International Seminar on Entrepreneurship and Business (ISEB 2015). Faculty of Entrepreneurship and Business,UMK, pp. 621-627. ISBN 9789670955032
institution	Universiti Malaysia Kelantan
building	Perpustakaan Universiti Malaysia Kelantan
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	Universiti Malaysia Kelantan
content_source	UMK Institutional Repository
url_provider	http://umkeprints.umk.edu.my/
language	English
description	Managing financial risk continues to be an integral part of assessing financial instrument performance. It is important to note that many empirical studies have looked on factors such as total risk and diversifiable risk or even beta, standard deviation and variance as risk representation. Due to the urgent need for a single risk measure, Value-at-Risk (VaR) has attained more demand in replacing standard deviation or volatility as the most widely used risk measure. However, VaR has so far not been exploited extensively in explaining fixed income financial risk within specific parameters, assumptions and data characteristics. In addition, most literature with regards to the usage of VaR has associated the measure with the assumption of normal distribution. Maintaining a normality assumption and failure to account for any financial time series imperfection will undoubtedly lead to underestimating or overestimating VaR and should the risk of heavy-tailed events fail to be quantified, the financial distress implications of trader’s actions will not be captured accurately. This paper highlights the proposition to fill the gap in the knowledge of financial risk measures by adding a new parameter dimension to the quantification of VaR for fixed income securities. This will be done by extending the measure through the inclusion of several volatility models under a different assumption of return distribution. The new dimension includes associating VaR estimation based on Bayesian distribution. Within this new parameter dimension, the financial risk modelling for the fixed income securities should be able to portray the actual traits of the return thus providing more accurate financial risk estimation
format	Book Section
author	Zatul Karamah Ahmad Baharul Ulum Anis Suhaila Anas Azwan Abdullah Zaminor Zamzamir@Zamzamin Siti Salwani Abdullah Suraya Mahmood
spellingShingle	Zatul Karamah Ahmad Baharul Ulum Anis Suhaila Anas Azwan Abdullah Zaminor Zamzamir@Zamzamin Siti Salwani Abdullah Suraya Mahmood A risk analysis proposition for fixed income securities
author_facet	Zatul Karamah Ahmad Baharul Ulum Anis Suhaila Anas Azwan Abdullah Zaminor Zamzamir@Zamzamin Siti Salwani Abdullah Suraya Mahmood
author_sort	Zatul Karamah Ahmad Baharul Ulum
title	A risk analysis proposition for fixed income securities
title_short	A risk analysis proposition for fixed income securities
title_full	A risk analysis proposition for fixed income securities
title_fullStr	A risk analysis proposition for fixed income securities
title_full_unstemmed	A risk analysis proposition for fixed income securities
title_sort	risk analysis proposition for fixed income securities
publisher	Faculty of Entrepreneurship and Business,UMK
publishDate	2015
url	http://discol.umk.edu.my/id/eprint/8579/1/Conference%20Paper%2034%20%20ISEB%202015.pdf http://discol.umk.edu.my/id/eprint/8579/
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score	13.211869

A risk analysis proposition for fixed income securities

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