Reference no: EM132046835

When managing interest rate risk, we discussed in class and recorded lectures covered that the first method to handle would be to “perfectly predict future interest rates”. The next step would be to measure the interest-rate risk the bank had on its balance sheet and make any possible adjustments to manage that risk on the balance sheet. The third step would be to try to manage the on-balance-sheet-interest rate risk by using “off balance sheet” measures. Starting with a definition of “interest rate risk”, provide a “manual” for how you could undertake the three steps within the SBG environment. Your answer should include possible ways to predict interest rates, ways to measure interest rate risk, ways to try to manage interest rate risk on the balance sheet, and ways to manage interest rate risk off the balance sheet. Again, keep your responses as appropriate to the SBG. There is no page limit to this response.