Interest rate, liquidity, and sovereign risk: derivative-based VaR
Journal: The Journal of Risk Finance
Year: 2017

Purpose The purpose of this paper is to study connections between interest rate risk and credit risk and investigate the inter-risk diversification benefit due to the joint consideration of these risks in the banking book containing sovereign debt. Design/methodology/approach The paper develops the historical derivative-based value at risk (VaR) for assessing the downside risk of a sovereign debt portfolio through the integrated treatment of interest rate and credit risks. The credit default swa