In this study, stochastic simulation based risk analysis is applied to the government
domestic debt stock in Turkey with the motivation to identify the cost and risk
characteristics of alternative debt financing strategies. Future path of interest rates is
simulated by using the yield curve forecasting framework in Diebold and Li (2002),
which is founded on the Nelson-Siegel yield curve model. Yield curve simulation is
based on the estimated term structure of interest rates for the period June 2001-July
2004. Simulated yield curves are generally upward sloped and concave. Contrary to
the common observation, long-term yields are more volatile compared to short-term
yields. Under each financing strategy, debt is rolled over on top of simulated term
structure of interest rates. Alternative financing strategies are compared with respect
to absolute Cost-at-Risk, relative Cost-at-Risk and relative risk measures computed
from the simulated cost distributions. Results of the risk analysis are influenced by
the characteristics of the simulated term structure of interest rates and the additional
yield imposed on the coupon bonds, which is assumed to reflect risk perception of
investors for increased maturity.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/12605677/index.pdf |
| Date | 01 December 2004 |
| Creators | Gurcihan, Burcu H. |
| Contributors | Gaygisiz, Esma |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
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