European Parliament Library

Interest rate risk in the banking book, a best practice guide to management and hedging, Beata Lubinska

"Asset Liability Management, the practice of matching the term structure and cash flows of an organization's asset and liability portfolios to maximize returns and minimize risk, is a key component of any financial institution's overall operating strategy. Due to a heavily regulated landscape and increasing competition for resources such as liquidity and capital, financial institutions -- especially banks -- are driven to constantly search for ways to run a more sophisticated ALM operation. As a result, the role of the ALM unit has to constantly evolve, extending beyond the risk management field. On top of the unit's traditional function of managing risk associated to the banking book, it now has to manage the regulatory capital of the bank and actively position the balance sheet to maximize profit. These contemporary challenges call for ALM optimization techniques, more particularly, ways to optimize the banking book using a quantifiable approach. The proposed book promotes active management of the banking book through optimization techniques presented in the book that effectively combine interest rate risk and liquidity risk management into one holistic approach"--, Provided by publisher
Table Of Contents
Cover -- Title Page -- Copyright Page -- Contents -- Preface -- About the Website -- Introduction -- Chapter 1 What is IRRBB and why is it important? -- Subcategories of interest rate risk -- Repricing risk (gap risk) -- Yield risk -- Optionality risk -- Basis risk -- Regulatory overview for IRRBB - what has changed? -- ECB 2017 IRRBB stress test -- Interest rate shocks -- Oil Supply Crisis -- HY/LBO/Default Risk -- Inflation expectations -- Great Bond Massacre - 94 -- Chapter 2 How to identify and measure Interest Rate Risk in the Banking Book -- Identification of IRRBB - case studies of the exposure to IRRBB -- The dual nature of IRRBB -- Exposure to short-terminterest rate risk - maturity gap analysis -- Maturity gap analysis according to the advanced approach -- Brief comparison of two approaches: the basic maturity gap and the advanced repricing gap -- Two different ways of looking at the maturity gap -- Repricing gap analysis and refixing gap analysis -- Maturity gap analysis from the economic value perspective -- Time bucket sensitivity analysis - PV01 -- Duration gap analysis -- Limits of duration gap analysis -- IRRBB metrics -- Earnings at Risk (EaR) -- Net Interest Income sensitivity - delta NII -- Present Value under + 1 bp parallel curve shift (PV01) -- Value at Risk (VaR) -- Credit Spread Risk in the Banking Book (CSRBB) -- Chapter 3 How to manage IRRBB -- Hedging instruments for IRRBB -- Forward starting swaps -- Interest rate options - caps, floors and swaptions -- Why consider interest rate swaps? -- Natural hedging and hedging through derivatives -- Hedging strategies -- Blended rate strategy (also known as partial hedge) -- Interest rate cap and floor -- Forward rate lock -- Chapter 4 Behaviouralisation of items without deterministic maturity and their impact on IRRBB
Literary Form
non fiction
Physical Description
1 online resource (259 pages)
Specific Material Designation
Form Of Item

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