文档介绍：Chapter 14
Interest rate
risk measurement
Learning objectives
Describe interest rate risk and its forms
Identify thate risk (cont.)
Interest rate risk exposures may also be described as:
Direct
Reinvestment and price risk
Indirect
Relating to the future actions of market participants, . a rise in interest rates causes borrowers to seek new loans elsewhere and/or repay existing loans
Basis
Occurs when pricing differentials exist between markets, . futures market and the underlying physical market
Chapter organisation
Interest rate risk
Exposure management systems
Assets repriced before liabilities principle
(ARBL)
Pricing financial securities
Repricing gap analysis
Duration
Convexity
Interest rate risk management techniques
Summary
Exposure management systems
An exposure management system involves structured procedures that enable a firm to effectively measure and manage risk, including:
Forecasting
Strategies and techniques
Management reporting systems
(cont.)
Exposure management systems (cont.)
Forecasting
A firm needs to understand factors that will impact upon risk exposures and its environment
A firm must know the current structure of its balance sheet and forecast future changes in its assets, liabilities and equities with regard to:
future business activity growth
future interest rates
future financing needs and use of debt financing
(cont.)
Exposure management systems (cont.)
Strategies and techniques
The strategies and techniques used relate to the types of interest cash flows associated with a firm’s assets and liabilities, and include:
Specified proportions of fixed-interest versus floating-interest debt, with remaining portion available to take advantage of forecast changes
(cont.)
Exposure management systems (cont.)
Strategies and techniques (cont.)
Monitoring and adjusting the maturity structure of assets and liabilities, taking into account the