2014 | 4(21) | 25-41
Article title

Review of the static methods used in the measurement of the exposure to the interest rate risk

Title variants
Languages of publication
Current financial regulation requires banks to have interest rate risk methods in place commensurate with the size and complexity of the bank. The more sophisticated model, the better the prediction of the future Net Interest Income and its sensitivity to the movement of the interest rate curve. The static methods of which an overview is presented in this article, struggle with limitations such as an unchanged interest rate curve, the non-inclusion of items with optionality and many others. The objective of this article is to show how static methods progressed with time, and how some of their limitations presented by a basic Maturity Gap analysis can be addressed in an interesting way. In addition, it also provides the reader with an interpretation of the results of the analysis performed through the aforementioned methods.
Physical description
  • Basel Committee on Banking Supervision, 2004, Principles for the Management and Supervision of Interest Rate Risk, No. 1, pp. 23-30.
  • Bierg G., Kaufman G.G., 1985, Duration gap for financial institutions, “Financial Analyst Journal”, 41(2), pp. 68-71.
  • Burghardt G., 1994, The Treasury Bond Basis, Irwin, New York, p. 90
  • Cernauskas D., Demetriades E., 2004, Time Structure of interest rate, [in:] C. Alexander, E. Sheedy (eds.), The PRM Handbook, vol. 1, I. A.6., Prmia.
  • Drago D., 1998, Rischio di interesse e gestione bancaria. Modelli e tecniche a confronto, Bancaria Editrice, Roma.
  • DragoD., 2001, Nuove tendenze dell’Asset&Liability Management nella banca, Banca Editrice.
  • Fabrizi P.L., 1995, Nuovi modelli di gestione dei flussi finanziari nelle banche, Giuffre, Milano.
  • Hull J., 2012, Risk Management and Financial Institutions, Wiley, New York.
  • Kaufman G.G., 1984, Measuring and managing interest rate risk: A primer, “Federal Reserve Bank of Chicago Economic Perspectives”, vol. 8, no. 1, pp. 16-29.
  • Lusignani G., 1996, La gestione dei rischi finanziari nella banca, Il Mulino, Bologna.
Document Type
Publication order reference
YADDA identifier
JavaScript is turned off in your web browser. Turn it on to take full advantage of this site, then refresh the page.