TAILIEUCHUNG - Lecture Financial institutions, instruments and markets (7e): Chapter 14 – Viney, Phillips

In this chapter, you will learn to: Describe interest rate risk and its forms, identify the components of an interest rate risk exposure management system, explain the interest rate risk management principle of asset repricing before liabilities, revisit financial securities repricing and interest rate risk, | Chapter 14 Interest rate risk measurement Learning objectives Describe interest rate risk and its forms Identify the components of an interest rate risk exposure management system Explain the interest rate risk management principle of asset repricing before liabilities Revisit financial securities repricing and interest rate risk Analyse the structure and benefits associated with interest rate risk measurement using duration and convexity Appreciate the availability of both internal and external interest rate risk management techniques 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 Interest rate risk Chapter 13 considered the: macro-economic context of interest rates loanable funds approach to interest rate determination theories that explain the shape of the yield curve The timing and extent of interest rate changes is unknown Interest rate risk needs to be managed (cont.) Interest rate risk (cont.) During and after the GFC, interest rate risk were an important topic As credit risks emerged during 2007 and 2008, interest rates rose sharply Sharp and sudden rises in interest rates exposed many individuals and firms to higher borrowing costs The identification and management of interest rate risk is important for firms and financial institutions Interest rate risk (cont.) Interest rate risk takes two forms 1. Reinvestment risk Impact of a change in interest rates on a firm’s future cash flows 2. Price risk Impact of a change in interest rates on the value of a firm’s assets and liabilities An inverse relationship exists between interest rates and security prices; . a rise in interest rates results in a fall in the value of an asset or liability, or vice versa (cont.) Interest rate risk

• Tài chính doanh nghiệp
• Financial institutions
• Financial Instruments
• Financial markets
• Financial system
• Interest rate risk measurement
• Interest rate risk
• Lecture Financial markets and institutions
• Financial institutions markets
• Risks at financial institutions
• Market risk
• Savings institutions
• Credit unions
• Commercial banks
• Financial statements
• Financial markets and institutions
• Interest rates change
• Financial institutions exist
• Central banking
• Capital markets
• Money markets
• Interest rate fundamentals
• Interest rates
• Security valuation
• Federal reserve system
• Monetary policy
• Money market yields
• Bond markets
• Municipal bonds
• Mortgage markets
• Primary mortgage market
• Stock markets
• Common stock
• Foreign exchange markets
• Foreign exchange
• Derivative securities markets
• Futures markets
• Commercial bank liabilities
• Regulation of commercial banks
• Deposit guarantee funds
• Insurance companies
• Life insurance companies
• Securities firms
• Investment banks
• Mutual funds
• Hedge funds
• Pension funds
• Private pension funds
• Managing credit risk
• Balance sheet
• Managing liquidity risk
• Managing interest rate risk
• Insolvency risk
• Managing risk
• Loan sales
• Managing risk off the balance sheet