Comparision of predictability of fixed incomes risk measures in pricing; Case Study of Debt Securities Accepted in Tehran Stock Exchange

Document Type : Research Paper

Authors

1 Faculty member, Faculty of Management, Islamic Azad University, Central Tehran Branch, Iran.

2 . Ph.D. student of Finance Management, Department of Management, Islamic Azad University, Central Tehran Branch, Iran

3 M.A. student of Financial Engineering and Risk Management, University of Tehran, Tehran, Iran.

Abstract

The price of a fixed income portfolio is a function of future cash flows and expected market rates. Since future cash flows are fixed, the price changes of the bonds will occur in response to changes in the expected market rate of return. The main issue for holders of securities is determining the sensitivity of the price of the bonds to the expected rate of return. Major measures in this area are convexity and modified duration. In addition to these two criteria, in this study, the "yield to maturity at risk" criterion is also defined. The main purpose of the research is to find a gauge that is more suitable for price estimation. Since one of the most important factors influencing the price of a sheet of risk material is the sheet, therefore, the measure that has the best performance in estimating the price of a sheet is the most efficient measure in determining its risk. To this end, the ability to estimate each of the above measures was compared using regression, which shows that the yield to maturity at risk is the best estimation power. Therefore, the best measure for determining the risk of Iranian debt market is yield to maturity at risk, and financial analysts and potential investors can use this criterion as a risk factor in optimal portfolio investment models, portfolio modification Available and analyze the risk of fixed income securities.

Keywords

References

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Financial Management Strategy
Volume 7, Issue 3 - Serial Number 26
October 2019
Pages 175-199

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History

  • Receive Date: 06 May 2019
  • Revise Date: 09 June 2019
  • Accept Date: 10 June 2019

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