An empirical study on open position risk assessment using VAR and regression analysis: A case study of Iranian banking industry


Mohammad Khodaei Valahzaghar, Mina Ghavidel, Mojtaba Heidar and Elmira Mahmoudzadeh


During the past few years, there have been tremendous fluctuations on different currencies. For instance, European common currency, Euro, has be fluctuated between 0.60 to 0.9 against US dollar. Therefore, it is important to study the behavior of currency valuations using different techniques. In this paper, we present an empirical study to measure the impact of different items on risk of foreign currency using value at risk (VaR) and regression methods. The proposed model of this paper investigates whether the risk of open positions of six foreign currencies including US dollar, Euro, British Pound, Switzerland Frank, Norwegian Kroner and United Emirate Dirham increase during the time horizon. The proposed study of this paper uses historical daily prices of these currencies for a fiscal year of 2011 in one of private banks located in Iran and measures the relative risk. The results of the implementation of two methods of VaR and linear regression indicate that the risk of open positions increases during the time horizon.


DOI: j.msl.2012.06.005

Keywords: Open Position ,Net Foreign Currency Balance Sheet Items (NFCBSI) ,Foreign Currency Assets ,Foreign Currency Liabilities Value at Risk (VaR) ,Linear Regression ,Historical Simulation

How to cite this paper:

Valahzaghar, M., Ghavidel, M., Heidar, M & Mahmoudzadeh, E. (2012). An empirical study on open position risk assessment using VAR and regression analysis: A case study of Iranian banking industry.Management Science Letters, 2(6), 2135-2140.


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