The risk management policy framework constitutes the critical connection between the formulation and implementation of debt management decisions.
Debt managers need to have a view on the optimal structure of the public debt portfolio. Ideally, they should be able to assess how a portfolio should be
structured on the basis of cost-risk criteria so as to hedge the government's fiscal position from various shocks. The optimal debt composition is derived by
looking at the relative impact of the risk and costs of the various debt instruments on the probability of missing a well-defined stabilisation target.
Emerging market debt managers are generally facing greater and more complex risks in managing their sovereign debt portfolio and executing their funding strategies,
than their colleagues in the more advanced markets. At the same time, many emerging market are now in the position to benefit from efficient international or domestic
risk sharing. In view of these structural obstacles, debt and risk management (including the specification of a strategic benchmark) need to be integrated into a broader
policy reform framework.
This macro area is broken down in the following sub-categories:
- Asset & Liability Management (ALM)
- Risk Management Models
- Derivatives
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