management

Analyzing Interest Rate Risk In Banking Books – Summary And Regulatory Requirements

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Interest Rate RiskInterest rate risk is the risk of the bank of decrease in profit and equity on account of fluctuating interest rates. The sensitivity of change in price of bond to change in interest rate in the market shall impact the influence of interest rate risk. The sensitivity of the bond shall be influenced by two factors:
The time to maturity of the bond;
Coupon rate of the bond.
In other words, interest rate risk is the risk …

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