Interest Rate Risk Management using Duration Gap Methodology
The world for financial institutions has changed during the last 20 years, and become riskier and more competitive-driven. After the deregulation of the financial market, banks had to take on extensive risk in order to earn sufficient returns. Interest rate volatility has increased dramatically over...
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General Association of Economists from Romania
2008-01-01
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doaj-33602b689d5242de9e03f79ec11be51d2020-11-24T23:57:29ZengGeneral Association of Economists from RomaniaTheoretical and Applied Economics1841-86781844-00292008-01-01XV118418678Interest Rate Risk Management using Duration Gap MethodologyDan Armeanu0Florentina-Olivia Balu1Carmen Obreja2 Academia de Studii Economice, Bucuresti The world for financial institutions has changed during the last 20 years, and become riskier and more competitive-driven. After the deregulation of the financial market, banks had to take on extensive risk in order to earn sufficient returns. Interest rate volatility has increased dramatically over the past twenty-five years and for that an efficient management of this interest rate risk is strong required. In the last years banks developed a variety of methods for measuring and managing interest rate risk. From these the most frequently used in real banking life and recommended by Basel Committee are based on: Reprising Model or Funding Gap Model, Maturity Gap Model, Duration Gap Model, Static and Dynamic Simulation. The purpose of this article is to give a good understanding of duration gap model used for managing interest rate risk. The article starts with a overview of interest rate risk and explain how this type of risk should be measured and managed within an asset-liability management. Then the articles takes a short look at methods for measuring interest rate risk and after that explains and demonstrates how can be used Duration Gap Model for managing interest rate risk in banks. http://store.ectap.ro/articole/273.pdf interest rateriskmanagementassets and liabilitiesduration gapbankinterest rate risk |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Dan Armeanu Florentina-Olivia Balu Carmen Obreja |
spellingShingle |
Dan Armeanu Florentina-Olivia Balu Carmen Obreja Interest Rate Risk Management using Duration Gap Methodology Theoretical and Applied Economics interest rate risk management assets and liabilities duration gap bank interest rate risk |
author_facet |
Dan Armeanu Florentina-Olivia Balu Carmen Obreja |
author_sort |
Dan Armeanu |
title |
Interest Rate Risk Management using Duration Gap Methodology |
title_short |
Interest Rate Risk Management using Duration Gap Methodology |
title_full |
Interest Rate Risk Management using Duration Gap Methodology |
title_fullStr |
Interest Rate Risk Management using Duration Gap Methodology |
title_full_unstemmed |
Interest Rate Risk Management using Duration Gap Methodology |
title_sort |
interest rate risk management using duration gap methodology |
publisher |
General Association of Economists from Romania |
series |
Theoretical and Applied Economics |
issn |
1841-8678 1844-0029 |
publishDate |
2008-01-01 |
description |
The world for financial institutions has changed during the last 20 years, and become riskier and more competitive-driven. After the deregulation of the financial market, banks had to take on
extensive risk in order to earn sufficient returns. Interest rate volatility has increased dramatically over
the past twenty-five years and for that an efficient management of this interest rate risk is strong required.
In the last years banks developed a variety of methods for measuring and managing interest rate risk.
From these the most frequently used in real banking life and recommended by Basel Committee are based
on: Reprising Model or Funding Gap Model, Maturity Gap Model, Duration Gap Model, Static and
Dynamic Simulation.
The purpose of this article is to give a good understanding of duration gap model used for managing
interest rate risk. The article starts with a overview of interest rate risk and explain how this type of risk
should be measured and managed within an asset-liability management. Then the articles takes a short look at methods for measuring interest rate risk and after that explains and demonstrates how can be used Duration Gap Model for managing interest rate risk in banks. |
topic |
interest rate risk management assets and liabilities duration gap bank interest rate risk |
url |
http://store.ectap.ro/articole/273.pdf
|
work_keys_str_mv |
AT danarmeanu interestrateriskmanagementusingdurationgapmethodology AT florentinaoliviabalu interestrateriskmanagementusingdurationgapmethodology AT carmenobreja interestrateriskmanagementusingdurationgapmethodology |
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