商业银行管理英文课件：第7章 Risk Management for Changing Interest Rates Asset-Liability Management and Duration Techniques

《商业银行管理英文课件：第7章 Risk Management for Changing Interest Rates Asset-Liability Management and Duration Techniques》由会员分享，可在线阅读，更多相关《商业银行管理英文课件：第7章 Risk Management for Changing Interest Rates Asset-Liability Management and Duration Techniques（87页珍藏版）》请在装配图网上搜索。

1、Chapter SevenRisk Management for Changing Interest Rates:Asset-Liability Management and Duration TechniquesCopyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All

2、Rights Reserved.Key Topics Asset,Liability,and Funds Management Market Rates and Interest Rate Risk The Goals of Interest Rate Hedging Interest-Sensitive Gap Management Duration Gap Management Limitations of Interest Rate Risk Management Techniques7-2Copyright 2013 The McGraw-Hill Companies,Inc.Perm

3、ission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Introduction Even as a financial institution takes on risk,it must protect the value of its net worth from erosion,which could result in ult

4、imate failure Financial-service managers have learned to look at their asset and liability portfolios as an integrated whole They must consider how their institutions whole portfolio contributes to the firms goals of adequate profitability and acceptable risk Known as asset-liability management(ALM)

5、Can protect against business cycles and seasonal pressures7-3Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Asset-Liability Management Str

6、ategies Asset Management Strategy Control over assets,no control over liabilities The public determined the relative amounts of deposits；The financial manager could exercise control only over the allocation of incoming funds by deciding who was to receive the scarce quantity of loans available and w

7、hat the terms on those loans would be.7-4Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Asset-Liability Management Strategies Liability Ma

8、nagement Strategy Control over liabilities by changing rates and other terms Bankers began to devote greater attention to opening up new sources of funding and monitoring the mix and cost of their deposit and nondeposit liabilities.Control over funds sources,the key control lever was pricethe intere

9、st rate and other terms offered on deposits and other borrowings.7-5Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Asset-Liability Managem

10、ent Strategies Funds Management Strategy Works with both strategies Management should exercise as much control as possible over the volume,mix,and return or cost of both assets and liabilities in order to achieve the financial institutions goals.Managements control over assets must be coordinated wi

11、th its control over liabilities so that asset management and liability management are internally consistent and do not pull against each other.This can control risk exposure.Maximize returns and minimize costs.7-6Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or di

12、splay.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.EXHIBIT 71 Asset-Liability Management in Banking and Financial Services7-7Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill

13、/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest rates affect the banks net interest marginInterest rates affect the banks net interest marginAsset 8%$100Total$100Liability 4%$90Equity$10Total$100AssetsClaims4.4%$1003.6$8.0$100.04$90.0

14、8$100LeasesandLoansNetSecuritiesTotalExpenseInterestTotalIncomeInterestTotalAssetsEarningAverageExpenseInterestTotalIncomeInterestTotalMarginInterestNetMcGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Asset 8%$100Total$100Liability 6

15、%$90Equity$10Total$100AssetsClaims2.6%$1004.5$8.0$100.06$90.08$100AssetsEarningAverageExpenseInterestTotalIncomeInterestTotalMarginInterestNetFixed interest loan but variable interest liability.Interest rates affect the banks net interest marginInterest rates affect the banks net interest marginMcGr

16、aw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Rate effects on equity valueMcGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Manag

17、ement Challenges Changing interest rates impact both the balance sheet and the statement of income and expenses of financial firms Price Risk When interest rates rise,the market value of the bond or asset falls Reinvestment Risk When interest rates fall,the coupon payments on the bond are reinvested

18、 at lower rates7-11Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)F

19、orces Determining Interest Rates Loanable Funds Theory The interest rate(price of credit)tends to settle at the point where the quantities of loanable funds demanded and supplied are equal.The Measurement of Interest Rates The interest rate is a ratio of the fees we must pay to obtain credit divided

20、 by the amount of credit obtained.YTM Bank Discount Components of Interest Rates7-12McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.EXHIBIT 72 Determination of the Rate of Interest in the Financial Marketplace Where the Demand and S

21、upply of Loanable Funds(Credit)Interact to Set the Price of Credit7-13Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:On

22、e of the Greatest Management Challenges(continued)Interest rates are the price of credit Demanded by lenders as compensation for the use of borrowed funds Expressed in percentage points and basis points(1/100 of a percentage point)Yield to Maturity(YTM)The discount rate that equalizes the current ma

23、rket value of a loan or security with the expected stream of future income payments that the loan or security will generate7-14Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill

24、 Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)Y Yield to maturity(YTM)ield to maturity(YTM)7-15Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.The value of assets is the present value of future

25、cash flow.V=PV(future cash flows)Size,timing,and riskiness of the cash flows.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)How to Calculate the Yield to Maturi

26、ty7-16Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)Another popula

27、r interest rate measure is the bank discount rate(DR)Often quoted on short-term loans and money market securities(such as Treasury bills)7-17Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 T

28、he McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)The DR measure ignores the effect of compounding and is based on a 360-day year Unlike the YTM measure,which assumes a 365-day year and assumes that interest income is compounded

29、at the calculated YTM The DR measure uses the face value of a financial instrument to calculate its yield or rate of return Makes calculations easier but is theoretically incorrect The purchase price of a financial instrument is a much better base to use in calculating the instruments true rate of r

30、eturn 7-18Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)To convert

31、 a DR to the equivalent yield to maturity,we can use the formula7-19Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One

32、of the Greatest Management Challenges(continued)Market interest rates are a function of Risk-free real rate of interest Various risk premiums Default Risk Inflation Risk Liquidity Risk Call Risk Maturity Risk7-20Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or dis

33、play.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)Market interest rate formula7-21Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reprodu

34、ction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Bond has 5 years to maturity,an$80 annual coupon,and a$1,000 face value.Time012345 Coupons$80$80$80$80$80 Face Value$1,000 How much is this bond worth?It depends on cu

35、rrent level of interest rates riskiness of firm Y Yield to maturity(YTM)ield to maturity(YTM)McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.We expect a 5%yield to maturity?FV+1000 PMT+100 i5 n30 PV-1,768.62 Yield to maturity is 20%

36、?FV+1000 PMT+100 i20 n30 PV-502.11 Y Yield to maturity(YTM)ield to maturity(YTM)McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Bond values($)Interest rates(%)1-year bond30-year bond$1,768.62$916.67$1,047.62$502.1151015202,0001,5001

37、,000500Value of a Bond with a 10%Coupon Rate for Different Interest Rates and MaturitiesInterest rate 1 year 30 years 5%$1,047.62$1,768.62 101,000.001,000.00 15956.52671.70 20916.67502.11Time to Maturity Interest rate risk and the length of maturityMcGraw-Hill/IrwinBank Management and Financial Serv

38、ices,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Yield to Maturity Longer-term loans and securities often carry higher market interest rates than shorter-term loans and securities due to maturity risk because of greater opportunities for loss over the life of a longer-term loan.The g

39、raphic picture of how interest rates vary with different maturities of loans viewed at a single point in time is called a yield curve.The relationship of yields and the residual life.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.I

40、nterest Rate Risk:One of the Greatest Management Challenges(continued)Yield Curves Graphical picture of the relationship between yields and maturities of securities Generally created with treasury securities to keep default risk constant Shapes of the yield curve Upward long-term rates are higher th

41、an short-term rates Downward short-term rates are higher than long-term rates Horizontal short-term and long-term rates are equal 7-26Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGr

42、aw-Hill Companies,Inc.,All Rights Reserved.EXHIBIT 73 Yield Curves for U.S.Treasury Securities in 2009 and 20107-27Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,I

43、nc.,All Rights Reserved.Interest Rate Risk:One of the Greatest Management Challenges(continued)Typically managers of financial institutions that focus on lending fare somewhat better with an upward-sloping yield curve Most lending institutions experience a positive maturity gap between the average m

44、aturity of their assets and the average maturity of their liabilities If the yield curve is upward sloping,then revenues from longer-term assets will outstrip expenses from shorter-term liabilities The result will normally be a positive net interest margin(interest revenues greater than interest exp

45、enses)In contrast,a relatively flat(horizontal)or negatively sloped yield curve often generates a small or even negative net interest margin7-28Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 200

46、8 The McGraw-Hill Companies,Inc.,All Rights Reserved.EXHIBIT 74 The Spread between Short-Term and Long-Term Interest Rates on Treasury Securities(October 2010)7-29Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financi

47、al Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin In order to protect profits against adverse interest rate changes,management seeks to hold fixed the financial firms net interest margin(NIM)7-30Copyright

48、 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)Among the most p

49、opular interest rate hedging strategies in use today is interest-sensitive gap management Gap management techniques require management to perform an analysis of the maturities and repricing opportunities associated with interest-bearing assets and with interest-bearing liabilities If management feel

50、s its institution is excessively exposed to interest rate risk,it will try to match as closely as possible the volume of assets that can be repriced as interest rates change with the volume of liabilities whose rates can also be adjusted with market conditions during the same time period7-31Copyrigh

51、t 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)Examples of Rep

52、riceable(Interest-Sensitive)Assets and(Interest-Sensitive)Liabilities and Nonrepriceable Assets and Liabilities7-32Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,I

53、nc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)A financial firm can hedge itself against interest rate changes no matter which way rates move by making sure for each time period that The gap is the portion of the balance sheet affected by

54、interest rate risk7-33Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Ma

55、rgin(continued)If interest-sensitive assets exceed the volume of interest-sensitive liabilities subject to repricing,the financial firm is said to have a positive gap and to be asset sensitive In the opposite situation,suppose an interest-sensitive banks liabilities are larger than its interest-sens

56、itive assets7-34Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.AssetsAssetsLiabilities and Equity CapitalLiabilities and Equity CapitalVau

57、lt cashNRSDemand depositsNRSST securitiesRSANOW accountsNRSLT securitiesNRSMoney market depositsRSLVariable-rate loanRSAST savingsRSLST loansRSALT savingsNRSLT loansNRSFed funds borrowingRSLOther assetsNRSEquity capitalNRSInterest sensitive gap=interest sensitive assets interest sensitive liabilitie

58、sOne of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.AssetsAssetsLiabilities and EquityLiabilities and EquityVault cashNRS$20Demand depositsNRS$5ST secu

59、ritiesRSA15NOW accountsNRS5LT securitiesNRS30Money market depositsRSL20Variable-rate loanRSA40ST savingsRSL40ST loansRSA20LT savingsNRS60LT loansNRS60Fed funds borrowingRSL55Other assetsNRS10EquityNRS10$195$195Dollar gap=interest sensitive assets interest sensitive liabilitiesOne of the Goals of Int

60、erest Rate Hedging:Protect the Net Interest Margin(continued)McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.Dollar gap=interest sensitive assets interest sensitive liabilities =($15+$20+$40)($20+$40+$55)=$75-$115 =-$40One of the Go

61、als of Interest Rate Hedging:Protect the Net Interest Margin(continued)McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.GapGapCauseCauseRatesRatesProfitsProfitsPositiveRSA$RSL$RiseRise (Asset)FallFallNegativeRSA$1 means asset-sensiti

62、ve bankOne of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)There are

63、 several ways to measure the interest-sensitive gap(IS GAP)One method Dollar IS GAP If interest-sensitive assets(ISA)are$150 million and interest-sensitive liabilities(ISL)are$200 million The Dollar IS GAP=ISA ISL=$150 million$200 million=-$50 million An institution whose Dollar IS GAP is positive i

64、s asset sensitive,while a negative Dollar IS GAP describes a liability-sensitive condition7-40Copyright 2013 The McGraw-Hill Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserv

65、ed.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)Relative IS GAP ratio A Relative IS GAP greater than zero means the institution is asset sensitive,while a negative Relative IS GAP describes a liability-sensitive financial firm7-41Copyright 2013 The McGraw-Hill

66、Companies,Inc.Permission required for reproduction or display.McGraw-Hill/IrwinBank Management and Financial Services,7/e 2008 The McGraw-Hill Companies,Inc.,All Rights Reserved.One of the Goals of Interest Rate Hedging:Protect the Net Interest Margin(continued)Interest Sensitivity Ratio(ISR)An ISR of less than 1 tells us we are looking at a liability-sensitive institution,while an ISR greater than unity points to an asset-sensitive institution Only if interest-sensitive assets and liabilities a