Ppt on interest rate risk management

Chapter 11 Bond Pricing and Selection

change as interest rates change Any good portfolio manager knows Malkiel’s theorems Theorem 1 Bond prices move inversely with yields: If interest rates rise, the price of an existing bond declines If interest rates decline, the price of an existing bond increases Theorem 2 Bonds with longer maturities will fluctuate more if interest rates change Long-term bonds have more interest rate risk Theorem 3 Higher coupon bonds have less interest rate risk Money/


McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Chapter Seven Asset-Liability Management: Determining and Measuring Interest Rates.

The McGraw-Hill Companies, Inc., All Rights Reserved. Market Risk Price Risk –When Interest Rates Rise, the Market Value of the Bond or Asset Falls Interest rate risk ( Reinvestment Risk/Refinancing Risk) –When Interest Rates Fall, the Coupon Payments on a Bond or maturing loans are Reinvested at Lower Rates –When interest rates rise the refinancing costs rise 7-11 McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies/


Measuring the market risk of illiquid positions

) and a Convertible Bond valuation methodology They include also Quanto Options, Performance Options, Variance, Volatility and Correlation Derivatives, FX Derivatives with Stochastic Interest Rates, TRS and Repos on them, etc. Valuation models for derivative products and their application in managing market risk Convertible Bonds are bonds that have embedded an option to convert a bond into common stock at a certain Conversion Ratio (Strike/


Chapter 13 Managing the Investment Portfolio

a trading account Objectives of the Investment Portfolio Safety or preservation of capital Liquidity Yield Credit risk diversification Help in manage interest rate risk exposure Assist in meeting pledging requirements Objectives of the Investment Portfolio Accounting for Investment Securities FASB/STRIPS Many banks purchase zero-coupon Treasury securities as part of their interest rate risk management strategies The U.S. Treasury allows any Treasury with an original maturity of at least 10 years to /


Risk Management of U.S. Money Center Banks

selling individual assets in the secondary market Market Risk Management Trading Risk Management Trading account assets and liabilities Derivative positions Mortgage banking assets Trading Activities Market Risk Interest Rate Risk Management Goal: to manage interest rate sensitivity so that movements in interest rates do not adversely affect net interest income What involved: securities,residential mortgage portfolio, Securities monitored the interest rate risk position of the portfolio and repositioned the/


© 2002 South-Western Publishing 1 Chapter 12 Futures Contracts and Portfolio Management.

the duration? 14 Duration Matching (hedging) Bullet immunization Bank immunization 15 Introduction Duration matching selects a level of duration that minimizes the combined effects of reinvestment rate and interest rate risk – accomplished through: – Cash market – Utilize interest rate futures to manage these risks Two versions of duration matching (cash market): – Bullet immunization – Bank immunization 16 Bullet Immunization Seeks to ensure that a predetermined sum of money is available/


Risk Management Dr. Keith M. Howe Summer 2008. Definition Risk and uncertainty Risk aversion Risk management The process of formulating the benefit-cost.

Group (www.riskmetrics.com) Types of risks firms face Market risk - interest rate - foreign exchange - commodity price Hazard risk - physical damage - liabilities - business interruption Operational risk - industry sectors - geographical regions Strategic risk - competition - reputation - investor support Assignment of risk responsibilities CEO Strategic risk management CRO Market risk management Hazard risk management Operational risk management Hedgeable Insurable Diversifiable Three dimensions of/


Asset Liability Management in Banks. Components of a Bank Balance Sheet.

chance or probability of loss or damage Credit RiskMarket RiskOperational Risk Transaction Risk /default risk /counterparty risk Commodity riskProcess risk Portfolio risk /Concentration risk Interest Rate riskInfrastructure risk Settlement riskForex rate riskModel risk Equity price riskHuman risk Liquidity risk But under ALM risks that are typically managed are…. Will now be discussed in detail Interest Rate Risk Currency Risk Liquidity Risk  Liquidity risk arises from funding of long term assets by short/


Managing Bond Portfolios CHAPTER 11. 11-2 Discuss the interest rate risk Introduce the notion of duration ( 存續期間 ), commonly used to measure interest.

of differentiation, dP 1 /dy = 100 dP 2 /dy The aspect of Duration Dollars is very important for interest rate risk management. However, this chapter does not put focus on this topic 11-12 The (dP/P)/(dy/y) is an alternative to measure the interest rate risk and it is size independent since it measures the impact of the percentage change in the yield on the/


Welcome to this Presentation Banks Credit Rating

, or position taking). Use of non-cash market instruments (e.g. futures, forwards, Swaps), Levels of interest rate, foreign exchange, and equity participation in the balance sheet. Management attitude towards the Asset/Liability Management (ALM) and the composition of the balance sheet. Banks Credit Rating Rating Procedures for Banks Trading Risk Clear description of the organization structure. Breakdown of products/services by currency, credit quality, volume, and/


THE CHANGING BANK ENVIRONMENT

or funding differential. These two measures are extremely important in evaluating a bank’s ability to manage interest rate risk. As interest rates change, so will a bank’s interest income and interest expense. For example, if interest rates increase, both interest income and interest expense will increase because some assets and liabilities will reprice at higher rates. Variation in NIM and spread indicates whether a bank has positioned its assets and liabilities/


Bank Management 19.

with increasing interest rates Managing Interest Rate Risk Determining whether to hedge interest rate risk Banks often use all three methods Banks use their analysis of gap with interest rate forecasts to make their hedging decision Methods of reducing interest rate risk Maturity matching of loans and deposits Using floating-rate loans Using interest rate futures contracts Using interest rate swaps Using interest rate caps Managing Interest Rate Risk Methods of reducing interest rate risk Maturity matching/


THE CHANGING BANK ENVIRONMENT

or funding differential. These two measures are extremely important in evaluating a bank’s ability to manage interest rate risk. As interest rates change, so will a bank’s interest income and interest expense. For example, if interest rates increase, both interest income and interest expense will increase because some assets and liabilities will reprice at higher rates. Variation in NIM and spread indicates whether a bank has positioned its assets and liabilities/


Chapter 81 CHAPTER 8 RISK MANAGEMENT: ASSET-LIABILITY MANAGEMENT (ALM) AND INTEREST-RATE RISK.

cap + sell floor = collar (Fig. 8-7) Buy floor + sell cap = collar (Fig. 8-9) The use of collars by LRBA and ARBL banks Chapter 835 Asset Securitization Technique for managing interest-rate risk by removing risky assets from the balance sheet. Pass-through finance – banks either (1) originates and sells loans or (2) originates, sells, and services loans Chapter 836 Building Blocks of/


Chapter Five Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques.

changing interest rates. 5. Funds management is using tools from both. 6. Managers have to deal with interest-rate risk every day, since the market is always changing. 7. Protecting the net interest margin, or the SPREAD between interest revenues and interest costs, managers use interest sensitive gap management tools Chapter Concept Checks 5-1 What do the following terms mean: Asset management? Liability management? Funds management? P. 134-135 5-3. What forces cause interest rates to/


ALM 1 ASSET & LIABILITY MANAGEMENT IN COMMERCIAL BANKS Instructor……Bülent Şenver

CA M EL Management QualityManagement Quality ALM bsenver@superonline.com 41 CAM E L Earnings EfficiencyEarnings Efficiency ALM bsenver@superonline.com 42 CAME L Liquidity RiskLiquidity Risk ALM bsenver@superonline.com 43 CAMEL RISKS Capital AdequacyCapital Adequacy Asset QualityAsset Quality ManagementManagement EarningsEarnings LiquidityLiquidity ALM bsenver@superonline.com 44 BANKING RISKS 1.2.3.4.5.CAMEL 6. Credit Risk 7. Interest Rate Risk 8. Interest Rate Sensitivity Risk 9. Foreign Exchange/


Serving the Cause of Public Interest Indian Actuarial Profession 23 rd India Fellowship Seminar USE OF DERIVATIVES IN HEDGING INTEREST RATE RISKS AND ITS.

www.actuariesindia.org14 Introduction to IRD Instruments whose payoffs are dependent in some way on the level of interest rates Underlying asset is the right to pay or receive a notional amount of money at a given interest rate Different tools to manage interest rate risk Volume of trading in interest rate derivatives in both the over-the-counter and exchange-traded markets has been increasing rapidly Popular for investors/


Chapter 23 Active Bond Portfolio Management Strategies

Strategies (continued) Risk Factors and Portfolio Management Strategies The last three non-term risks (MBS sector risk, MBS volatility risk, and MBS prepayment risk) are associated with the investing in residential mortgage pass-through securities. MBS sector risk is the exposure to the sectors of the MBS market included in the benchmark. MBS volatility risk is the exposure of a benchmark index to changes in expected interest-rate volatility. MBS/


Banking and Trading Book Integrated Risk Management

decade, are near the end of its life cycle. Given the regulatory push toward market value analysis and the pressure on management to optimize performance relative to goals while managing interest rate risk, most financial institutions are moving toward computer simulation as their primary interest rate risk management tool. Simulation is fundamentally different from gap and duration models in that it is dynamic or forward looking rather than static/


Chapter 10 Risk Management in Islamic Finance

of issues, either as bonds or stocks - Because of a sudden change in investment objectives The ‘fair fixed rate’ is used when pricing a SWAP Swaps are used to hedge certain risks e.g. interest rate risk Mitigation Techniques in Islamic Finance Learning Objective 1.4 Understand risk management techniques such as hedging through the use of the following derivatives: forwards, futures, and swaps, based on the/


Agenda Oil and gas industry in Canada o Overview o Characteristics o Main risks Penn West Exp o Company profile o Risk management Encana Corporation o.

to the activity it promotes in the sector of oil and natural gas production. Commodity price risk, foreign currency risk, credit risk, interest rate risk, liquidity risk, environmental and climate change. The company has got the aim to mitigate these risks throughout business strategies and management controls using determined financial instruments. As at December 31, 2012 and 2011, the only asset or liability measured at fair value on a/


Review of Accounting. Learning Objectives: Use of the balance sheet, the income statement, and the statement of cash flows by managers. Use of the balance.

. – Example: In the past, a 7-11 manager has found that she will lose 1% of candy inventory to shoplifters. She can use this information to estimate future losses and also to design better controls. 95 Correlation Correlation is a measure of the relative movement of two variables relative to each other. – Example: If interest rates go up, a real estate agent knows/


Stephen G. CECCHETTI Kermit L. SCHOENHOLTZ Depository Institutions: Banks and Bank Management Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights.

of assets and liabilities, but it gets complicated. 12-57 Interest-Rate Risk Bank managers can use a number of tools to manage interest-rate risk. 1.They can match the interest-rate sensitivity of assets with that of liabilities. Although this decreases interest-rate risk, it increases credit risk. 2.Alternatives include the use of derivatives, specifically interest-rate swaps. 12-58 12-59 Trading Risk Today banks hire traders to actively buy and sell securities/


Managing Non-Interest Income & Non-Interest Expense 1.

numerous fee- based services that assist in managing risks Primary services are: Providing advice concerning mergers and acquisitions and spin-offs of lines of business Managing investable assets Making risk management decisions involving the uses of foreign currencies/ a bank 218 Funding Sources and Banking Risks Funding Sources: Interest Rate Risk Many depositors and investors prefer short-term instruments that can be rolled over quickly as interest rates change Banks must offer a substantial premium /


0 Portfolio Management 3-228-07 Albert Lee Chun Duration, Convexity and Bond Portfolio Management Strategies Lecture 10 27 Nov 2008.

indicator of recessions. Inverted yield curves are a leading indicator of recessions. Albert Lee Chun Portfolio Management 23 Price Sensitivity to Interest Rates Albert Lee Chun Portfolio Management 24 Interest Rate Risk Interest Rate Risk ↑ as Time to Maturity ↑ Interest Rate Risk ↑ as Coupon RateInterest Rate Risk ↑ as Yield to Maturity ↓ Albert Lee Chun Portfolio Management 25 Interest Rate Risk and Maturity Longer maturity bond prices are more sensitive to changes in yields than shorter maturity/


RISK MANAGEMENT MODULE A – Asset Liability Management AND MODULE B – Risk Management A PRESENTATION BY K ESWAR MBA XLRI, CAIIB CHIEF MANAGER, SPBT COLLEGE.

RISK MANAGEMENT MODULE A – Asset Liability Management AND MODULE B – Risk Management A PRESENTATION BY K ESWAR MBA XLRI, CAIIB CHIEF MANAGER, SPBT COLLEGE. Market Credit Operational BANKS TYPICALLY FACE THREE KINDS OF RISK Risk of loss due to unexpected re-pricing of assets owned by the bank, caused by either – Exchange rate fluctuation – Interest rate fluctuations – Market price of investment fluctuations Risk of loss due to unexpected borrower default Risk/.75 Duration & Interest Rate Risk If a bank /


The Role of the ENTERPRISE in Risk Management Richard Goldfarb, FCAS Ernst & Young Casualty Actuaries in Reinsurance Seminar New York, NY June 1-2, 2006.

to decisions that are not even directionally the same as when only the balance sheet is taken into account.  Three Examples To Demonstrate This Point: Interest Rate Risk Management Identifying Optimal Capital Levels Risk-Based Allocation of Capital 7 Interest Rate Risk Management ( “ ALM ” ) – Background  Interest rate risk commonly measured using duration (and other related measures) Duration measures the sensitivity of the value of a series of cash flows to (small) changes/


Chapter 9 Interest Rate and Currency Swaps. 9-2 The Goals of Chapter 9 Define the interest rate risk for MNEs –It can be decomposed into the credit risk,

at a lower interest rate For the annual renewal, the new interest rate may reflect both the prevailing 1-year interest rate (reprising risk) and the creditworthiness of the borrower at that time point (credit risk) Management of Interest Rate Risk 9-8 9-9 Management of Interest Rate Risk Both foreign exchange and interest rate risk management must focus on managing existing or anticipated cash flow exposures of the firm Before treasurers and financial managers manage interest rate risk, they must resolve/


Copyright © 2009 Pearson Prentice Hall. All rights reserved. Chapter 15 Interest Rate and Currency Swaps.

-42 Summary of Learning Objectives The primary sources of interest rate risk to an MNE are short-term borrowing and investing and long-term borrowing The techniques and instruments used in interest rate risk management resemble those used in currency risk management: the old method of lending and borrowing The primary instruments include forward rate agreements (FRAs), interest rate futures, forward swaps and interest rate swaps Copyright © 2009 Pearson Prentice Hall. All rights reserved/


Risk Management 陳明道 教授 David M. Chen Graduate Institute of Finance Crouhy, Michel, Dan Galai, and Robert Mark McGraw-Hill, Inc.,

. –ALCO is typically responsible for establishing, documenting, and enforcing all policies that involve market risk, such as liquidity, interest rate, and FX risk. –Also responsible for the delegation of market risk limits to the president and chief risk officer (CRO). –Should ensure that the bank ’ s infrastructure can support the bank ’ s market risk management objectives. CRO is responsible for RM strategy, policies, methodologies, and overall governance.* –Authority/


Credit Risk https://store.theartofservice.com/the-credit-risk-toolkit.html.

and the result of modern credit models and efficient risk management technologies used by P2P companies. https://store.theartofservice.com/the-credit-risk-toolkit.html Interest - Interest rates and credit risk 1 It is increasingly recognized that the business cycle, interest rates and credit risk are tightly interrelated. The Jarrow- Turnbull model was the first model of credit risk that explicitly had random interest rates at its core. Lando (2004), Darrell Duffie and/


Bolton Financial Services, LLC Chartered Wealth Management Seminar January 27-29, 2006 Jeffrey D. Lewis, CFA.

or reorganization. There are three popular sub-categories in event-driven strategies: risk (merger) arbitrage, distressed/high yield securities, and Regulation D. Bolton Financial Services, LLC Type of Hedge Fund Strategies (cont.) Fixed Income Arbitrage: The fixed income arbitrageur aims to profit from price anomalies between related interest rate securities. Most managers trade globally with a goal of generating steady returns with low volatility/


Global Investment Management Prof Bruno Solnik 1.

Investment Management 149 Prof Bruno Solnik Yield curves Yield play (ride,…) Duration Multi-currency Dual currency, currency option 150 Prof Bruno Solnik 151 Prof Bruno Solnik Interest Rate Forecast Remember the “duration” relation: 152 Interest Rate Forecast /of Hedge Funds 342 Hedge Funds – Cons (Risks) The unique risks of hedge funds include: –Liquidity risk –Pricing risk –Counterparty credit risk –Settlement risk –Short squeeze risk –Financing squeeze risk 343 Impact of the financial Tsunami Many hedge /


Business Ethics: A New Style of Management and Investment Professor David M. Chen Graduate Institute of Finance Fu Jen Catholic.

economy). Bangladeshs Finance and Planning Minister M. Saifur Rahman charges that some microfinance institutions use excessive interest rates. Many studies have shown that risks like sickness, natural disaster and overindebtedness are a critical dimension of poverty, and that very poor people rely heavily on informal savings to manage these risks.* It might be expected that MFIs would provide safe, flexible savings services to this population/


1 Building Portfolios with Stocks, Bonds, and Mutual Funds Financial & Retirement Planning Jay Taparia, CFA Managing Director, Sanskar Investments, Inc.

economic cycle Industry analysis Industry analysis Management strategy Management strategy 25 Conceptualizing the 3 /Interest Rate Risk – as interest rates rise, the price (and value) of the bond falls. Capital Loss!! Interest Rate Risk – as interest rates rise, the price (and value) of the bond falls. Capital Loss!! Reinvestment Rate Risk – has to do with the reinvestment of interest and principal payments. Reinvestment Rate Risk – has to do with the reinvestment of interest and principal payments. Interest/


© 2012: South-Asian Management Technologies Foundation International Financial Reporting Standards Self Study QAS CPE Program.

–Terms and conditions affecting the amount, timing, and uncertainty of the insurer’s future cash flows –Interest rate risk and credit risk detail –Exposures to interest rate risk or market risk under embedded derivatives that are contained in a host insurance contract © 2012: South-Asian Management Technologies Foundation Disclosures Additional Disclosures –Insurance risk, including the sensitivity of profit or loss and equity to changes in applicable variables, concentrations of insurance/


THE EFFECTIVE USE OF CAPITAL Chapter 9 Bank Management 6th edition. Timothy W. Koch and S. Scott MacDonald Bank Management, 6th edition. Timothy W. Koch.

to: emphasize the importance of capital and authorize early regulatory intervention in problem institutions, and authorized regulators to measure interest rate risk at banks and require additional capital when it is deemed excessive. A focal point of the Act was the system/-Term Commercial Loans Highly Levered Transactions Leveraged Buyout (LBO) Involves a group of investors, often part of the management team, buying a target company and taking it private with a minimum amount of equity and a large amount /


Doc. Irena JindrichovskaCorporate Finance Management 21 CORPORATE FINANCE MANAGEMENT 2 Master Course VŠFS Fall 2013 Doc. Ing. Irena Jindřichovská, CSc.

investment alternative than stocks Long term bonds are more sensitive to the changes in interest rates than short term bonds Types of risk –default risk & time riskinterest rate risk & reinvestment risk Doc. Irena JindrichovskaCorporate Finance Management 2140 MATURITY AND VOLATILITY Prices and returns for long-term bonds are more volatile than those for shorter term bonds Interest rate risk Doc. Irena JindrichovskaCorporate Finance Management 2141 DIFFERENT TYPES OF BONDS ‘Plain vanilla’bonds Floating/


Copyright © 2010 Pearson Prentice Hall. All rights reserved. Chapter 9 Interest Rate and Currency Swaps.

-6 Copyright © 2010 Pearson Prentice Hall. All rights reserved. 9-7 Management of Interest Rate Risk As an example, Trident Corporation has taken out a three-year, floating-rate loan in the amount of US$10 million (annual interest payments). Some alternatives available to management as a means to manage interest rate risk are as follows: –Refinancing –Forward rate agreements –Interest rate futures –Interest rate swaps Copyright © 2010 Pearson Prentice Hall. All rights reserved. 9-8/


23-1 Enterprise Risk Management Chapter 23 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

annual report 23-8 Example: Disney’s Risk Management Policy Disney provides stated policies and procedures concerning risk management strategies in its annual report: The company tries to manage exposure to interest rates, foreign currency, and the fair market value of certain investments Interest rate swaps are used to manage interest rate exposure 23-9 Example: Disney’s Risk Management Policy Disney provides stated policies and procedures concerning risk management strategies in its annual report: Options/


PRICING FIXED-INCOME SECURITIES Chapter 4 Bank Management 6th edition. Timothy W. Koch and S. Scott MacDonald Bank Management, 6th edition. Timothy W.

compares favorably with the cost of jumbo CDs and other purchases liabilities. The range of potential maturities allows banks to better manage their interest rate risk. The interesting issue is whether these advances are truly a permanent source of funds and thus comparable to core deposits, or whether they are hot money. Measuring the cost of funds Average /


Time preferences suggest a positive component to all discount rates Call this the risk-free rate (remember the last lecture?!?) Risk aversion suggests.

amount of debt increases The risk, and therefore the interest rate, increases – As interest increases, the probability of default increases and so does the costs associated with bankruptcy Legal fees, loss of asset value, decreased sales, loss of key employees, loss of trade credit, etc. Agency cost of debt – As more debt is used to finance firm, shareholders may pressure management to undertake more risky/


ADAPTED FOR THE SECOND CANADIAN EDITION BY: THEORY & PRACTICE JIMMY WANG LAURENTIAN UNIVERSITY FINANCIAL MANAGEMENT.

.g., discontinue a product or service). Copyright © 2014 by Nelson Education Ltd. 21-34 Financial Risk Management Concepts Financial risk exposure refers to the risk inherent in the financial markets due to price, interest rate, and exchange rate fluctuations. Example: A firm holds a portfolio of bonds, interest rates rise, and the value of the bonds falls. Copyright © 2014 by Nelson Education Ltd. 21-35 Using Derivatives to Reduce/


Interest Rate Risk Dr Said Abu Jalala. Introduction to Interest rates Interest is the "rent" paid to borrow money. The lender receives a compensation.

interest rate risk Deals with the valuation effect of changes in interest rates New Proposals On Managing Interest Rate Risks The Basle Committee on Banking Supervision has published proposals to be used by banking supervisory authorities in managing interest rate risks. The proposals are: * The board of directors of a bank to approve interest rate risk management policies and procedures, and be informed regularly of the interest rate risk exposure of the bank. New Proposals On Managing Interest Rate Risks/


Conventional Money Market School of Finance & Banking WF5083 Financial Risk Management WF5023 Semester June 2003 Topic 6 Conventional Money Market Prepared.

Amount InvestedRM 890,000 =12.3% Conventional Money Market School of Finance & Banking WF5083 Financial Risk Management WF5023 Semester June 2003 Interest Rates Vs. Discount Rates The discount rate on discount instruments must thus be converted to yield before it can be compared to interest rates offered on interest rate instruments. The compounding period of rates must also be equal before they can be compared. Conventional Money Market School of Finance/


Risk Management 陳明道 教授 David M. Chen Graduate Institute of Finance Crouhy, Michel, Dan Galai, and Robert Mark McGraw-Hill, Inc.,

the last 25 years generated by derivative positions. Correlation between credit, market and liquidity risks Predictably, high interest rate leads to low value and low liquidity of real estate, which leads to default, then leads to low interest rate. The near-collapse of Long-Term Capital Management (LTCM) in 1998 highlight the risks of high leverage to an individual institution. –It also showed how problems in one/


INDIAN INSTITUTE OF BANKING & FINANCE RISK MANAGEMENT MODULE C & D

; concepts and functions; instruments in the treasury market; development of new financial products; control and supervision of Treasury management; linkage of domestic operations with foreign operations. Asset-liability management; Interest rate risk; interest rate futures; stock options; debt instruments; bond portfolio strategy; risk control and hedging instruments. Investments – Treasury bills – Money markets instruments such as CDs, CPs, IBPs; Securitisation and Forfaiting; Refinance and rediscounting/


ACCA Paper F9 – Financial Management Taught Course June 2010 Exams.

types of interest rate risk: gap exposure, basis risk. Describe the causes of interest rate fluctuations, including: structure of interest rates and yield curves, expectations theory, liquidity preference theory, market segmentation. Discuss and apply traditional and basic methods of interest rate risk management, including: matching and smoothing, forward rate agreements and asset & liability management. Identify the main types of interest rate derivatives used to hedge interest rate risk and explain/


ENTERPRISE RISK MANAGEMENT By CA. Rajkumar S Adukia B.Com(Hons.) FCA, ACS, MBA, AICWA, LLB,Dip IFRS(UK) DLL& LW

and liabilities do not always move together  Miscellaneous risk  Beyond insurer ability to predict/manage  Legal risk, political risk, general business risk www.carajkumarradukia.com60 How Property-Liability Insurers View Risk Hazard Risk Injury, property damage, liability Financial Risk Interest rates, equity values, commodity prices, foreign exchange Operational Risk Failed processes, people or systems Strategic Risk Competition, regulation, business decisions www.carajkumarradukia.com61 Insurance/


Chapter Seven Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques Copyright © 2013 The McGraw-Hill Companies,

The McGraw-Hill Companies, Inc., All Rights Reserved. Key Topics Asset, Liability, and Funds Management Market Rates and Interest Rate Risk The Goals of Interest Rate Hedging Interest-Sensitive Gap Management Duration Gap Management Limitations of Interest Rate Risk Management Techniques 7-2 Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display. McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved/


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