This book produces three main results. First, the interest rate risk from on-balance sheet term transformation of banks in Germany exceeds the euro area average and is bound to increase even further. Within Germany, savings banks and cooperative banks are particularly engaged. Second, supervisory interest rate shock scenarios are found to be increasingly detached both from the historic and the forecasted development of interest rates in Germany. This increasingly limits the informative content of mere exposure measures such as the Basel interest rate coefficient when used as risk measures. Third, there is a reasonable theoretical rationale and there is strong empirical evidence for banks' search for yield in interest rate risk, i.e. a negative link between the term spread and the taking of interest rate risk by banks. There is even a threshold of income below which banks' search for yield in interest rate risk surfaces openly.

Introduces practical approaches for optimizing management and hedging of Interest Rate Risk in the Banking Book (IRRBB) driven by fast evolving regulatory landscape and market expectations. Interest rate risk in the banking book (IRRBB) gained its importance through the regulatory requirements that have been growing and guiding the banking industry for the last couple of years. The importance of IRRBB is shifting for banks, away from ‘just’ a regulatory requirement to having an impact on the overall profitability of a financial institution. Interest Rate Risk in the Banking Book sheds light on the best practices for managing this importance risk category and provides detailed analysis of the hedging strategies, practical examples, and case studies based on the author’s experience. This handbook is rich in practical insights on methodological approach and contents of ALCO report, IRRBB policy, ICAAP, Risk Appetite Statement (RAS) and model documentation. It is intended for the Treasury, Risk and Finance department and is helpful in improving and optimizing their IRRBB framework and strategy. By the end of this IRRBB journey, the reader will be equipped with all the necessary tools to build a proactive and compliant framework within a financial institution. Gain an updated understanding of the evolving regulatory landscape for IRRBB Learn to apply maturity gap analysis, sensitivity analysis, and the hedging strategy in banking contexts • Understand how customer behavior impacts interest rate risk and how to manage the consequences Examine case studies illustrating key IRRBB exposures and their implications Written by London market risk expert Beata Lubinska, Interest Rate Risk in the Banking Book is the authoritative resource on this evolving topic.

This book provides a comprehensive overview of topics focusing on assessment, analysis, and management of financial risks in banking. The publication emphasizes risk-management principles and stresses that key players in the corporate governance process are accountable for managing the different dimensions of financial risk. This third edition remains faithful to the objectives of the original publication. A significant new edition is the inclusion of chapters on the management of the treasury function. Advances made by the Basel Committee on Banking Supervision are reflected in the chapters on capital adequacy, transparency, and banking supervision. This publication should be of interest to a wide body of users of bank financial data. The target audience includes persons responsible for the analysis of banks and for the senior management or organizations directing their efforts.

The dynamic banking and financial services environment in the country calls for prudent decision making under pressure. Management of Banking and Financial Services provides students and practitioners with a thorough understanding of managerial issues in the banking and financial services industry, enabling them to evaluate the overall organisational impact of their decisions. The first section of the book focuses on the basic concepts of banking and financial services, and the other sections explain how these concepts are applied in the global banking environment as well as in India. In addition to presenting the big picture of the banking and financial services industry, the book also provides useful tips on the trade-off between risk and return.

A practical guide to the practices and procedures of effectively managing banking risks Managing Risks in Commercial and Retail Banking takes an in-depth, logical look at dealing with all aspects of risk management within the banking sector. It presents complex processes in a simplified way by providing real-life situations and examples. The book examines all dimensions of the risks that banks face—both the financial risks—credit, market, and operational—and the non-financial risks—money laundering, information technology, business strategy, legal, and reputational. Focusing on methods and models for identifying, measuring, monitoring, and controlling risks, it provides practical advice backed up by solid theories, without resorting to the use of complicated mathematical and statistical formulas. Author Amalendu Ghosh exposes topics that are usually absent in books on managing banking risk—such as design of control framework, risk management architecture, credit risk rating, risk-based loan pricing, portfolio analysis, business continuity planning, and corporate governance. Author has extensive experience with a variety of major banks and institutions worldwide and brings a fresh perspective in the wake of the global finance crisis Presents a novel approach using models of the credit risk rating of different types of borrowers, the methodology for assigning weights for deriving the rating, and the scoring process Covers the essentials of corporate governance and options for credit risk assessment in line with the recommendations made in the New Basel Capital Accord Explains the methodology of risk-based internal audit, including techniques to enable bank branches to switch over from the old transaction-based audit methods With its logical sequence of the aspects of risk management, the book's layout is ideal for presentations, making it a handy tool for risk management training

In Bond Portfolio Management, Frank Fabozzi, the leading expert in fixed income securities, explains the latest strategies for maximizing bond portfolio returns. Through in-depth discussions on different types of bonds, valuation principles, and a wide range of strategies, Bond Portfolio Management will prepare you for virtually any bond related event-whether your working on a pension fund or at an insurance company. Key topics include investment objectives of institutional investors, general principles of bond valuation, measuring interest rate risk, and evaluating performance. Bond Portfolio Management is an excellent resource for anyone looking to master one of the world's largest markets, and is a perfect companion to Fabozzi's successful guide-The Handbook of Fixed-Income Securities.

This paper examines how Japan’s long-term interest rates and Japanese banks’ interest rate risk exposures may evolve under Abenomics. Results from a panel regression analysis for major advanced economies shows that long-term government bond yields in Japan are determined to a large extent by growth and inflation outlook, fiscal conditions, demography, and the investor base of government securities. A further deterioration of fiscal conditions would push up long-term rates by about 2 percentage points over the medium term, but the rise is partly offset by higher demand for safe assets amid population aging and increased purchases by the Bank of Japan. At the same time, illustrative scenarios suggest the interest rate risk exposure of Japanese banks could decline substantially over the next two years. However, if structural and fiscal reforms are incomplete, both long-tem yields and interest-risk exposures of Japanese banks could increase over the medium term.

The definitive guide to fixed income valuation and risk analysis The Trilogy in Fixed Income Valuation and Risk Analysis comprehensively covers the most definitive work on interest rate risk, term structure analysis, and credit risk. The first book on interest rate risk modeling examines virtually every well-known IRR model used for pricing and risk analysis of various fixed income securities and their derivatives. The companion CD-ROM contain numerous formulas and programming tools that allow readers to better model risk and value fixed income securities. This comprehensive resource provides readers with the hands-on information and software needed to succeed in this financial arena.

Inhaltsangabe:Einleitung: Die vorliegende Arbeit widmet sich dem Controlling des Zinsänderungsrisikos in Banken mit Hilfe des VaR-Konzeptes. Zinsänderungen wirken sich in Form des Margen-Risikos, des Reinvestment-Risikos und des Marktwertrisikos aus. Als Instrument zur Risikomessung und -steuerung in Banken wird seit Beginn der 90er Jahre der Value-at-Risk (VaR) propagiert. Der beeindruckende Vorteil des VaR-Konzeptes liegt darin, daß es einen monetären Maßstab bereitstellt, mit dem verschiedenartige Risiken zusammengeführt und vergleichbar gemacht werden. Die gängigen VaR-Modelle werden in dieser Arbeit kurz präsentiert und ihre Annahmen erläutert. Weiterhin werden die Annahmen auf ihre Gültigkeit bei der Modellierung von Zinsänderungsrisiken geprüft. Man möchte nicht nur wissen, ob diese Annahmen erfüllt sind, man möchte auch die Aussagefähigkeit von VaR auf etablierten Märkten und Emerging Markets vergleichen. Um die Performance der VaR-Methoden zu beurteilen, wird in dieser Arbeit ein Backtesting von drei Methoden - Historische Simulation, Monte Carlo Simulation und Methode der Extremwerttheorie - für zwei repräsentative Portfolios durchgeführt. Das erste Portfolio bestand aus einer DM-Bundesanleihe mit 5-jähriger Laufzeit, das zweite war ein Indexportfolio auf der Basis von JP Morgans Emerging Market Bond Index Plus für Rußland. Dabei zeigen sich deutliche Performance-Unterschiede: Während das Zinsänderungsrisiko der deutschen Anleihe relativ gut durch den VaR abgebildet wurde, erwiesen sich alle drei Methoden als unbrauchbar für den russischen Markt. Um die Ursachen für die Performance-Unterschiede auf beiden Märkten aufzuzeigen, werden die Verteilungseigenschaften beider Zeitreihen analysiert. Inhaltsverzeichnis:Table of Contents: 1.Introduction4 2.Identification of risk5 2.1Definition of interest rate risk5 2.2Components of a bank's interest rate exposure6 2.3Determinants of the term structure of interest rates12 3.Application of VaR for measurement of interest rate risk12 3.1VaR-definition13 3.2Methods of VaR- calculation15 3.3Consequences of underlying assumptions for risk estimation17 3.3.1Assumption of normal distribution17 3.3.2 Future like past assumption18 4.Specific problems of the interest rate risk estimation with VaR20 4.1Convexity20 4.2Reduced time to maturity and riding-the-yield-curve-effect22 4.3Compound effects of interest rate, exchange rate and credit risks23 4.4Further problems23 5.Empirical [...]