An exploration of interest rate risk measurement techniques such as GAP, earnings sensitivity analysis, Duration GAP and economic value of equity sensitivity analysis. Risk management policy implementation and how to change overall interest rate sensitivity through balance sheet adjustments or derivative contracts are discussed.
- Apply the mechanics of valuing cash flows including duration and price sensitivity
- Identify the determinants of the overall level of interest rates
- Use static GAP, duration GAP and sensitivity analysis to measure interest rate risk
- Examine how derivatives–futures, forwards, interest rate swaps, caps, floors and collars–are used to manage interest rate risk
- Apply course concepts to the management of interest rate risk within your bank