scholarly journals Risk of Interest Rates at the Level of Commercial Banks in Romania

2017 ◽  
Vol 22 (4) ◽  
pp. 281-288
Author(s):  
Ioana Raluca Sbârcea
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Asset Price ◽  
Banking System ◽  
Interest Rate Risk ◽  
Point Of View ◽  
Risk Indicators ◽  
Rate Risk ◽  
The Interest Rate

Abstract The banking system in Romania is a banking system under development, subject to fluctuations that exist on the market more than on more developed banking systems, fluctuations that can generate losses for banks if they are not properly managed. The losses that may be generated by these fluctuations, known as market risk, refer to the significant fluctuations in three indicators, namely the interest rate, the exchange rate and the asset price. In this article, I will analyse the interest rate risk from a conceptual point of view and the indicators that mitigate this risk. The analysis also contains a study of this risk among commercial banks in the system to highlight the level of risk and possible effects of its manifestation. I calculated and analysed the interest rate risk indicators, individually for the first three banks in the system, but also to comparatively, in order to highlight the existing differences.

Research on the Interest Rate Risk Management of Commercial Bank Based on F-W Duration Convexity Model

2014 ◽  
Vol 644-650 ◽  
pp. 5825-5827
Author(s):  
Feng Liu ◽  
Ping Zou
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Interest Rate Risk ◽  
Rate Risk ◽  
Interest Rate Risk Management ◽  
The Interest Rate ◽  
Marketization Reform ◽  
Management Capabilities

With the pace of interest rate marketization reform accelerates, interest rate risk faced by commercial banks increasingly prominent, so a higher demand for its interest rate risk management capabilities is required. This article describes the type of interest rate risk, then use F-W Duration Convexity model to make an empirical analysis in five large commercial banks. The results show: the five large bank duration and convexity gap are all positive, when interest rates rise, the five bank NV will be reduced, interest rates decline, then increased. According to ΔNV/PA, ICBC CCB and ABC faced the biggest interest rate risk, BOC followed, BCM minimum.

Basel I to Basel III: Impact of Credit Risk and Interest Rate Risk of Banks in India

2018 ◽  
Vol 17 (1_suppl) ◽  
pp. S83-S111 ◽  
Author(s):  
Noor Ulain Rizvi ◽  
Smita Kashiramka ◽  
Shveta Singh
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Interest Rates ◽  
Banking System ◽  
Interest Rate Risk ◽  
Theoretical Background ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Rate Risk ◽  
Net Interest Margin

The study explores the theoretical background of Basel III and investigates the drivers of interest rate risk and credit risk of banks in various parlances, namely, pre and post the financial crisis, phases of implementation and ownership on a sample of 36 listed banks in India. The findings indicate that the high capital adequacy requirement (CAR) exhibits a positive relation with gross non-performing assets (GNPAs) and net interest margin (NIM). This is perhaps one of the major drawbacks of Basel implementation, which may become a cause of lower GDP in the future as explained in the findings of the literature. Originality/value: This article is perhaps the first attempt of its kind to empirically examine the bank-specific, macroeconomic variables and link it with the Basel implementation in the Indian banking system for the time period 2002–2015. This study endeavours to enhance the existing empirical research in the field and give insights into the role of various factors on GNPAs and interest rates (with regards to Indian banks).

A Bayesian Pricing of Longevity Derivatives with Interest Rate Risks

2017 ◽  
Vol 0 (0) ◽  
Author(s):  
Atsuyuki Kogure ◽  
Takahiro Fushimi
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Mortality Risk ◽  
Interest Rate Risk ◽  
Stochastic Interest Rates ◽  
Rate Risk ◽  
Stochastic Interest ◽  
The Interest Rate ◽  
Longevity Bonds ◽  
Carter Model

AbstractMortality-linked securities such as longevity bonds or longevity swaps usually depend on not only mortality risk but also interest rate risk. However, in the existing pricing methodologies, it is often the case that only the mortality risk is modeled to change in a stochastic manner and the interest rate is kept fixed at a pre-specified level. In order to develop large and liquid longevity markets, it is essential to incorporate the interest rate risk into pricing mortality-linked securities. In this paper we tackle the issue by considering the pricing of longevity derivatives under stochastic interest rates following the CIR model. As for the mortality modeling, we use a two-factor extension of the Lee-Carter model by noting the recent studies which point out the inconsistencies of the original Lee-Carter model with observed mortality rates due to its single factor structure. To address the issue of parameter uncertainty, we propose using a Bayesian methodology both to estimate the models and to price longevity derivatives in line with (Kogure, A., and Y. Kurachi. 2010. “A Bayesian Approach to Pricing Longevity Risk Based on Risk Neutral Predictive Distributions.”

scholarly journals Confederation debt management since 1970

2019 ◽  
Vol 155 (1) ◽  
Author(s):  
Basil Guggenheim ◽  
Mario Meichle ◽  
Thomas Nellen
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Interest Rate Risk ◽  
Debt Maturity ◽  
Debt Management ◽  
Total Debt ◽  
Rate Risk ◽  
Rate Environment ◽  
The Interest Rate ◽  
Lock In

Abstract This paper analyzes the Confederation’s debt management. The Confederation actively manages roll over and interest rate risk by increasing bond maturity with increasing marketable debt-to-GDP levels. It further engages in active but asymmetric, one-sided interest rate positioning; i.e., it uses mostly bonds to affect debt maturity and does so only when the interest rate environment is favorable to lock-in interest rates by issuing longer-term bonds. Debt management is mainly driven by marketable debt rather than total debt. Issuing behavior became more regular and demand-oriented during the early 1990s when marketable and total debt increased in tandem.

scholarly journals Research on Interest Rate Risk of Housing Mortgage Loan Based on Computer Simulation

2021 ◽  
Vol 2021 ◽  
pp. 1-6
Author(s):  
Enlin Tang
Keyword(s):  
Computer Simulation ◽  
Interest Rate ◽  
Commercial Banks ◽  
Simulation Method ◽  
Interest Rate Risk ◽  
Mortgage Loan ◽  
Mortgage Loans ◽  
Rate Risk ◽  
The Interest Rate ◽  
Housing Mortgage Loan

In recent years, with the rapid increase of the business volume of housing mortgage loans of commercial banks, the risk of prepayment is increasingly exposed. Prepayment will have a great impact on the duration and convexity of housing mortgage loans of commercial banks and then bring difficulties to the asset liability management of banks. Therefore, empirical research on the changes of duration and convexity of housing mortgage loans caused by prepayment when the market interest rate changes is of great significance for commercial banks to manage interest rate risk exposure. Based on the analysis of the option characteristics of prepayable housing mortgage loan, the CIR model with GARCH(1, 1) is selected to describe the interest rate change path, and the computer simulation method is used to calculate OAS and then calculate the effective duration and effective convexity of housing mortgage loan under different prepayment rates, so as to understand the interest rate risk of housing mortgage loan in the presence of embedded option.

scholarly journals Valuing strategic investments under stochastic interest rates: A real option approach

2019 ◽  
Vol 16 (3) ◽  
pp. 89-97
Author(s):  
Luca Vincenzo Ballestra ◽  
Graziella Pacelli ◽  
Davide Radi
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Interest Rates ◽  
Real Option ◽  
Interest Rate Risk ◽  
Stochastic Interest Rates ◽  
Investment Projects ◽  
Rate Risk ◽  
Stochastic Interest ◽  
The Interest Rate

One of the most challenging issues in management is the valuation of strategic investments. In particular, when undertaking projects such as an expansion or the launch of a new brand, or an investment in R&D and intellectual capital, which are characterized by a long-term horizon, a firm has also to face the risk due to the interest rate. In this work, we propose to value investments subject to interest rate risk using a real options approach (Schulmerich, 2010). This task requires the typical technicalities of option pricing, which often rely on complex and time-consuming techniques to value investment projects. For instance, Schulmerich (2010) is, to the best of our knowledge, the first work where the interest rate risk is considered for real option analysis. Nevertheless, the valuation of investment projects is done by employing binomial trees, which are computationally very expensive. In the current paper, a different modeling framework (in continuous-time) for real option pricing is proposed which allows one to account for interest rate risk and, at the same time, to reduce computational complexity. In particular, the net present value of the cash inflows is specified by a geometric Brownian motion and the interest rate is modeled by using a process of Vasicek type, which is calibrated to real market data. Such an approach yields an explicit formula for valuing various kinds of investment strategies, such as the option to defer and the option to expand. Therefore, the one proposed is the first model in the field of real options that accounts for the interest rate risk and, at the same time, offers an easy to implement formula which makes the model itself very suitable for practitioners. An empirical analysis is presented which illustrates the proposed approach from the practical point-of-view and highlights the impact of stochastic interest rates in investment valuation.

scholarly journals Management of interest risk in a commercial bank under the conditions of the modern market

2018 ◽  
pp. 53-56
Author(s):  
N. V. Magzumova ◽  
V. V. Naydenova
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Interest Rate Risk ◽  
Global Changes ◽  
Political Situation ◽  
Rate Risk ◽  
Interest Rate Risk Management

In the economy of our country, under the influence of the wave of economic crisis, a situation has developed that has significantly affected the activities of commercial banks that are participants in the financial market. In recent years, there has been a consistently high amplitude of global changes in financial markets, due to the crisis and instability of the political situation in the country. All this affects the functioning of commercial banks, especially in the regulation of interest rates. The banking sector is constantly faced with all sorts of risks. Interest rate risk is rightly recognized as the most important bank risk. According to the Central Bank of theRussian Federation, interest rate risk is the risk of financial losses (losses) that arise as a result of an unfavorable change in interest rates on assets, liabilities and off-balance sheet instruments. Interest rate risk management in commercial banks has become complicated due to the current economic and political situation in our country, as well as the instability of market conditions. The development of practical recommendations aimed at improving the interest rate risk management system in a commercial bank is an urgent task for any commercial bank. 

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