Interest Rate Risk Dissertation Example

Interest Rate Risk Students’ Name Institution Affiliation INTEREST RATE RISK (IRR) Date / by name Bank preparation for IRR As a bank, preparation for IRR is a crucial factor in attaining set goals. It requires appropriate formation of oversight and board of management and a comprehensive process for risk management capable of identifying, quantify, monitor, and control any risk. Risk measurement over the duration helps to determine the sensitivity of a bond to changes of interest rate. Another step as a bank we take is to offer bonds with high coupon rates because they pay back the principal faster (Chen, 2012). The bank also puts the time duration for the grant into close consideration and adjusts it according to probable risks by either decreasing or increasing average bond portfolio duration. Depending on possible changes in the interest rate, raising interest rate dictates for a decrease in the average period and vice versa. Bonds whose maturities are short have a lower d...