March 2002
Intermediate to advanced
176 pages
3h 48m
English
book
Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition
by Jean Dermine, Youssef F. Bissada
Content preview from Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition
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Two measures of interest rate risk
Most banks are equipped with two measures of interest rate risk.
Although finance specialists would rather focus on the economic value at risk as it represents the present value of all future cash flows, senior bankers also carefully consider the first measure (impact on the NIM) because of the attention paid by bank analysts to short-term profitability and return on equity (ROE).
It is advisable to monitor both measures of risk.
In pillar 2 of the Basel II capital regulation discussed in Stage 8, it is recommended that the economic value of equity at risk does not exceed 20% of BIS capital ...
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