Measurement of interest rate risk, Financial Management

Assignment Help:

Changes in the bond value is inversely related to the change in the interest rates. If an investor holds a long bond position, he would incur loss if the interest rates increase and an investor who holds a short bond position would incur loss if the interest rates decreases. It is very important for a manager to quantify the outcome of a rate change in order to control interest rate risk. To measure interest rate risk exposure properly, a reliable valuation model is to be used. Valuation model helps to accurately determine the value of a position after an adverse rate move. 


Related Discussions:- Measurement of interest rate risk

How can we measure total return- rate of return, How can we measure Total r...

How can we measure Total return- Measuring the Rate of Return Total return can be defined as: Total returns = (Cash payment received + Price change over the period) / Purcha

Real Estate Finance, 1. Consider the following cash flows and reversion: T...

1. Consider the following cash flows and reversion: There is an $80,000 cash outflow at time zero. BTCFs for years 1-4, respectively, are $10,000, $20,000, $20,000, and $25,000.

Introduction to fixed income portfolio management strategies, Investors use...

Investors use two management strategies to manage their fixed income portfolios. They adopt either active management strategy or passive management strategy. A

How compound values can be calculated on anannual basis, How Compound value...

How Compound values can be calculated on anannual basis Compound values can be calculated on anannual basis, or on a half-yearly basis or on a monthly basis or on continuous ba

Chi square test as a test of independence, Chi Square Test as a Test of Ind...

Chi Square Test as a Test of Independence In real life decision making, managers often have to know whether the differences between the proportions observed from a number of sa

Revenue recognition or realisation, Revenue Recognition or Realisation ...

Revenue Recognition or Realisation The resources of business are utilized to earn revenue through sale of goods or rendering of services.The American Accounting Association d

Determine about the strategic benchmarking, Determine about the Strategic B...

Determine about the Strategic Benchmarking Comparison in terms of an organisations 'strategic choices' made to the most successful market leader for example review organisat

Cash flows from mortgage- backed security, It is a well known fact th...

It is a well known fact that the value of a financial claim reflects the present value of the cash flows produced by the financial claim. While valuing an MBS an

Report on the valuation of endess, Q. Report on the valuation of Endess? ...

Q. Report on the valuation of Endess? Ideally the valuation must be based upon the present value of incremental cash flows that result from the buy-in but in practice this data

International commercial terms or inco terms, I NC O terms You learnt...

I NC O terms You learnt that specifications, delivery period and destination are all dependent  factors   on  a   particular   project.  Let   us  know  about   the internati

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd