An analysis of exchange rate risk exposure related to the public debt portfolio of Tunisia: Beyond VaR approach

The aim of this study is to assess the exchange rate risk associated with the Tunisian public debt portfolio through Value-at-Risk (VaR) methodology. We use daily spot exchange rates of the Tunisian dinar against the three main debt currencies, the dollar, the euro and the yen. Our period of interest is from 02/01/2004 to 31/12/2008. Thetas and Marginal VaR analysis reveal that Japanese yen is the most risky currency constituting the Tunisian public debt portfolio. American dollar appears as a source of risk for the Tunisian external debt but remains less risky than the yen, while, the euro constitutes a hedge currency for exchange risk management associated with the Tunisian public debt portfolio.