Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique

Alice Constance Mensah; Ebenezer Okyere; Osei Antwi; Prince Kumi; Joseph Dadzie; Martin Owusu Amoamah

doi:doi:10.11648/j.ijefm.20140202.17

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Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique

Alice Constance Mensah, Ebenezer Okyere, Osei Antwi, Prince Kumi, Joseph Dadzie, Martin Owusu Amoamah

Published in International Journal of Economics, Finance and Management Sciences (Volume 2, Issue 2)

Received: 30 January 2014 Accepted: Published: 30 March 2014

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Abstract

VaR is a potential loss. The VaR methodology gives the definition to risk-based capital, or economic capital and confidence level reflects the risk appetite of the bank. This work is a delta-normal VaR application in the case of the Ghanaian economy. It assesses the exchange risk associated to the Ghana public debt portfolio. We used daily spot exchange rates of the Ghana cedi against the three main currencies, the dollar, the euro and the pound. We are interested in the period from 04/01/2000 to 31/12/2009. We demonstrated that the VaR result is very high and that there is a need for the government to also trade in a currency that can serve as a potential hedge against risk.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 2, Issue 2)
DOI	10.11648/j.ijefm.20140202.17
Page(s)	159-163
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Value- at- Risk, Public Debt Portfolio, Volatility

References

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[2]	Lopez, J. (1996). “Regulatory Evaluation of Value-at-Risk Models,” Working paper, New York Federal Reserve Bank.
[3]	Jackson, P., David J. M. and William P. (1997). “Bank capital and Value-at-Risk.” Journal of Derivatives . 4(3) Spring, pp. 73–89.
[4]	Crnkovic, C. and J. Drachman (1996). “A Universal Tool to Discriminate Among Risk Measurement Techniques,” Working paper, J. P. Morgan, Corp.
[5]	Kupiec, P. (1995): “Techniques for verifying the accuracy of risk measurement models,” Journal of Derivatives 3, pp. 73-84.
[6]	Hendricks, D. (1996). “Evaluation of Value at Risk Models using Historical Data.” Federal Reserve Bank New York Economic Policy Review 1996(April):
[7]	Beder, T. S. (1995). “VaR: Seductive but dangerous.” Financial Analysts Journal 1995(Sept-Oct): pp.12-24.
[8]	Giannopoulos, K. (2003): VaR modelling on long run horizons: Automation and Remote Control, 64(7), pp. 1094-1100.
[9]	Singh, M. K. (1997): Value at risk using principal components analysis - For term structure-dependent securities and FX derivatives. Journal of Portfolio Management: 24(1), pp. 101-109
[10]	Jorion, P. (1997): Value-at-Risk: The New Benchmark for Controlling Market Risk. Irwin, Chicago, Ill.
[11]	Dowd, K. (1998): Beyond Value-at-Risk: The New Science of Risk Management, John Wiley & Sons, London.
[12]	Saunder A. (1999); Credit Risk Measurement: New Approaches to Value-at-Risk and Other Paradigms John Wiley & Sons, London
[13]	Bodnar, G.M., G.S. Hayt and Martson, R.S. (1998): “1998 Wharton Survey of Financial Risk Management by U.S. Non-Financial Firms”, Financial Management, Vol. 27, No. 4, pp. 70-91.

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APA Style

Alice Constance Mensah, Ebenezer Okyere, Osei Antwi, Prince Kumi, Joseph Dadzie, et al. (2014). Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique. International Journal of Economics, Finance and Management Sciences, 2(2), 159-163. https://doi.org/10.11648/j.ijefm.20140202.17

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ACS Style

Alice Constance Mensah; Ebenezer Okyere; Osei Antwi; Prince Kumi; Joseph Dadzie, et al. Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique. Int. J. Econ. Finance Manag. Sci. 2014, 2(2), 159-163. doi: 10.11648/j.ijefm.20140202.17

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AMA Style

Alice Constance Mensah, Ebenezer Okyere, Osei Antwi, Prince Kumi, Joseph Dadzie, et al. Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique. Int J Econ Finance Manag Sci. 2014;2(2):159-163. doi: 10.11648/j.ijefm.20140202.17

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@article{10.11648/j.ijefm.20140202.17,
  author = {Alice Constance Mensah and Ebenezer Okyere and Osei Antwi and Prince Kumi and Joseph Dadzie and Martin Owusu Amoamah},
  title = {Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {2},
  number = {2},
  pages = {159-163},
  doi = {10.11648/j.ijefm.20140202.17},
  url = {https://doi.org/10.11648/j.ijefm.20140202.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20140202.17},
  abstract = {VaR is a potential loss. The VaR methodology gives the definition to risk-based capital, or economic capital and confidence level reflects the risk appetite of the bank. This work is a delta-normal VaR application in the case of the Ghanaian economy. It assesses the exchange risk associated to the Ghana public debt portfolio. We used daily spot exchange rates of the Ghana cedi against the three main currencies, the dollar, the euro and the pound. We are interested in the period from 04/01/2000 to 31/12/2009. We demonstrated that the VaR result is very high and that there is a need for the government to also trade in a currency that can serve as a potential hedge against risk.},
 year = {2014}
}

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TY  - JOUR
T1  - Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique
AU  - Alice Constance Mensah
AU  - Ebenezer Okyere
AU  - Osei Antwi
AU  - Prince Kumi
AU  - Joseph Dadzie
AU  - Martin Owusu Amoamah
Y1  - 2014/03/30
PY  - 2014
N1  - https://doi.org/10.11648/j.ijefm.20140202.17
DO  - 10.11648/j.ijefm.20140202.17
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 159
EP  - 163
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20140202.17
AB  - VaR is a potential loss. The VaR methodology gives the definition to risk-based capital, or economic capital and confidence level reflects the risk appetite of the bank. This work is a delta-normal VaR application in the case of the Ghanaian economy. It assesses the exchange risk associated to the Ghana public debt portfolio. We used daily spot exchange rates of the Ghana cedi against the three main currencies, the dollar, the euro and the pound. We are interested in the period from 04/01/2000 to 31/12/2009. We demonstrated that the VaR result is very high and that there is a need for the government to also trade in a currency that can serve as a potential hedge against risk.
VL  - 2
IS  - 2
ER  -

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Author Information

Alice Constance Mensah

Mathematics and Statistics Department, Accra Polytechnic, Accra, Ghana
Ebenezer Okyere

Research Department, Bank of Ghana, Accra, Ghana
Osei Antwi

Mathematics and Statistics Department, Accra Polytechnic, Accra, Ghana
Prince Kumi

Accountancy Department, Accra Polytechnic, Accra, Ghana
Joseph Dadzie

Mathematics and Statistics Department, Accra Polytechnic, Accra, Ghana
Martin Owusu Amoamah

Mathematics and Statistics Department, Accra Polytechnic, Accra, Ghana

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APA Style

Alice Constance Mensah, Ebenezer Okyere, Osei Antwi, Prince Kumi, Joseph Dadzie, et al. (2014). Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique. International Journal of Economics, Finance and Management Sciences, 2(2), 159-163. https://doi.org/10.11648/j.ijefm.20140202.17

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ACS Style

Alice Constance Mensah; Ebenezer Okyere; Osei Antwi; Prince Kumi; Joseph Dadzie, et al. Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique. Int. J. Econ. Finance Manag. Sci. 2014, 2(2), 159-163. doi: 10.11648/j.ijefm.20140202.17

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AMA Style

Alice Constance Mensah, Ebenezer Okyere, Osei Antwi, Prince Kumi, Joseph Dadzie, et al. Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique. Int J Econ Finance Manag Sci. 2014;2(2):159-163. doi: 10.11648/j.ijefm.20140202.17

Copy | Download

@article{10.11648/j.ijefm.20140202.17,
  author = {Alice Constance Mensah and Ebenezer Okyere and Osei Antwi and Prince Kumi and Joseph Dadzie and Martin Owusu Amoamah},
  title = {Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {2},
  number = {2},
  pages = {159-163},
  doi = {10.11648/j.ijefm.20140202.17},
  url = {https://doi.org/10.11648/j.ijefm.20140202.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20140202.17},
  abstract = {VaR is a potential loss. The VaR methodology gives the definition to risk-based capital, or economic capital and confidence level reflects the risk appetite of the bank. This work is a delta-normal VaR application in the case of the Ghanaian economy. It assesses the exchange risk associated to the Ghana public debt portfolio. We used daily spot exchange rates of the Ghana cedi against the three main currencies, the dollar, the euro and the pound. We are interested in the period from 04/01/2000 to 31/12/2009. We demonstrated that the VaR result is very high and that there is a need for the government to also trade in a currency that can serve as a potential hedge against risk.},
 year = {2014}
}

Copy | Download

TY  - JOUR
T1  - Assessing Foreign Exchange Risk Associated to a Public Debt Portfolio in Ghana Using the Value at Risk Technique
AU  - Alice Constance Mensah
AU  - Ebenezer Okyere
AU  - Osei Antwi
AU  - Prince Kumi
AU  - Joseph Dadzie
AU  - Martin Owusu Amoamah
Y1  - 2014/03/30
PY  - 2014
N1  - https://doi.org/10.11648/j.ijefm.20140202.17
DO  - 10.11648/j.ijefm.20140202.17
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 159
EP  - 163
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20140202.17
AB  - VaR is a potential loss. The VaR methodology gives the definition to risk-based capital, or economic capital and confidence level reflects the risk appetite of the bank. This work is a delta-normal VaR application in the case of the Ghanaian economy. It assesses the exchange risk associated to the Ghana public debt portfolio. We used daily spot exchange rates of the Ghana cedi against the three main currencies, the dollar, the euro and the pound. We are interested in the period from 04/01/2000 to 31/12/2009. We demonstrated that the VaR result is very high and that there is a need for the government to also trade in a currency that can serve as a potential hedge against risk.
VL  - 2
IS  - 2
ER  -

Copy | Download