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

Option-adjusted spread (oas), Option-Adjusted Spread (OAS) The prime ob...

Option-Adjusted Spread (OAS) The prime objective of an investor is to buy securities which have values greater than their market prices. The discussion made on the above valuat

Modern approach at financial problems, Modern approach at financial problem...

Modern approach at financial problems With the advent of technology and need to tighten shipsdue to competition, financial management became as much a science as art. Efficient

Wacc based on the president''s preference, Sapp Trucking's balance sheet il...

Sapp Trucking's balance sheet illustrates a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%.  This debt presently has a

Explain pro forma financial statements management goals, Explain how manage...

Explain how management goals are incorporated into pro forma financial statements. Management put a target goal and forecasters makes pro forma financial statements under the

Explain cross hedging, Explain cross-hedging and discuss the factors determ...

Explain cross-hedging and discuss the factors determining its effectiveness. Answer: Cross-hedging includes hedging a position in one asset by taking a position in another asse

Beta, what is the value of beta for this fund ? If the benchmark index for ...

what is the value of beta for this fund ? If the benchmark index for this mutual fund increased by 11.00% during the period covered by beta measure, what was the rate of return for

Define the cash budget, Q. Define the Cash Budget? Cash Budget: - A cas...

Q. Define the Cash Budget? Cash Budget: - A cash budget is an estimation of cash receipts and cash payments for a future period of time. It is prepared to predict the cash requ

What do you mean by average cost and marginal cost, Q. What do you mean by ...

Q. What do you mean by Average Cost and Marginal cost? Average Cost and Marginal cost: the average cost is the combined cost as explain above, but for the difference in the for

Embedded options, Embedded Options  is a provision in the ind...

Embedded Options  is a provision in the indenture that gives the issuer and/or the bondholder an option to take action against the other party.

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