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Methodology for Determining Market Risk Scenarios

Metadata Updated: February 10, 2025

The FHFA methodology to construct a historically-based shock for a given interest rate is to measure the absolute change at each term point on the corresponding yield curve over a six-month horizon, and then impose that absolute change on the current measure of that yield curve. However, because the current rate environment may differ significantly from the historical rate environment, imposing the historical shock on the current rate can result in a shock scenario that is implausible. Implausible shock scenarios include any that contain negative values for interest rates, and those where the resulting spread between any two different interest rates is inconsistent with the historically observed spread. To ensure that the resulting shock scenarios are plausible, FHFA uses a technique known as parsimonious factorization to represent each yield curve as a five-factor equation, and then applies measures of the shock made in parameter space to the current yield curve parameters to determine the shocked yield curve. This approach facilitates a straightforward means to impose constraints on generating the shock scenario that ensure its plausibility.

Access & Use Information

Public: This dataset is intended for public access and use. License: No license information was provided. If this work was prepared by an officer or employee of the United States government as part of that person's official duties it is considered a U.S. Government Work.

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Dates

Metadata Created Date January 25, 2023
Metadata Updated Date February 10, 2025
Data Update Frequency R/P1M

Metadata Source

Harvested from FHFA JSON

Additional Metadata

Resource Type Dataset
Metadata Created Date January 25, 2023
Metadata Updated Date February 10, 2025
Publisher Federal Housing Finance Agency
Maintainer
Identifier FHFA6035
Language en-US
Data Last Modified 2024-04-04T16:34:20.590Z
Rights true
Public Access Level public
Data Update Frequency R/P1M
Bureau Code 015:11
Metadata Context https://project-open-data.cio.gov/v1.1/schema/catalog.jsonld
Schema Version https://project-open-data.cio.gov/v1.1/schema
Catalog Describedby https://project-open-data.cio.gov/v1.1/schema/catalog.json
Data Quality True
Harvest Object Id 7bfe1179-99c3-48b1-85da-335c0374641d
Harvest Source Id f37782a8-9657-4976-8077-936b628b3973
Harvest Source Title FHFA JSON
Homepage URL https://www.fhfa.gov/data/market-risk-scenarios
Program Code 015:001
Publisher Hierarchy Federal Housing Finance Agency > Federal Housing Finance Agency
Source Datajson Identifier True
Source Hash 9d84055bbaf4875508a5dcc24d37b649ee4b2af61e72c2c2fd7d471142c3cdae
Source Schema Version 1.1
Temporal 2018-02-28/2022-10-31

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