Managing the risk of interest rates
2003
Zaltauskiene, N. (Lithuanian Univ. of Agriculture, Akademija, Kauno reg. (Lithuania))
The article deals with different forms of risk of interest rates: revaluation risk, risk of profit-yielding curve, the risk of basic points, and option risk. Risk of interest rates has been analysed in terms of income and economic value. The fluctuation of income or tendencies influences the sufficiency of capital, and bank stability image in the market. The success of interest rate management lies in the change of net interest and interest margin. The view of economic value includes the influence of the change of potential interest rates on the present money flow, and it helps to disclose long-term shifts in interest rates. Gap method is used in managing the risk of interest rates. The main drawbacks of the gap method are the choice of a standard term, and while applying this method, the fact that various changes in interest rates can influence the bank assets and property flows differently is not taken into account.
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