PPT-Managing Interest Rate Risk: GAP and Earnings Sensitivity

1 Managing Interest Rate Risk Interest Rate Risk The potential loss from unexpected changes in interest rates which can significantly alter a banks profitability and market value of equity 2 Managing Interest Rate Risk. the Cause of Public Interest. Indian Actuarial Profession. 23. rd. India Fellowship Seminar. USE OF DERIVATIVES IN HEDGING INTEREST RATE RISKS AND ITS RELEVANCE IN INDIAN INSURANCE INDUSTRY. Guide Name. . Stock Valuation is an Art not a Science. Economic drivers . of stock value. Fundamental analysis . based on accounting information. Technical analysis . based on price patterns. 2. The Economics of Stock Value. Day 4. Equity Valuation, Duration, EVE, Deposit Betas, & Hedging . Equity Valuation Focus. Basic fixed income security valuation rule:. Rates rise .  value falls. Rates fall  value rises. M. the . Capital Market, . and the Wealth of Nations. Why People Invest. Capital and Investment. Types of . capital. :. physical capital. human capital. Investment. : . the purchase . or development of a capital resource. UNCTAD, World Bank and IMF Workshop. Geneva, February 06-10 2017. Outline. Step 2: Cost & risk of existing debt. Cost and risk: Conceptual issues. Cost, risk, and the choice of time horizon. Indicators for market risk exposure. UNCTAD, World Bank and IMF Workshop. Geneva, February 06-10 2017. Outline. Step 2: Cost & risk of existing debt. Cost and risk: Conceptual issues. Cost, risk, and the choice of time horizon. Indicators for market risk exposure. 11:00 Lecture, Version A. Note for multiple-choice questions: Choose the closest answer. Geometric Average. On Nov. 1, 2013, . Slacky. Green Slacks was worth $100 per share. On Nov. 1, 2001, it was worth $50 per share. What is the geometric average rate of return over this 12-year period?. Interest Rate Hedges. 1 June, depositing in 5 months. So buy December. . = 19. On 1 June we buy 19 December contracts. On 1 November we will sell. Price 96.60. Basis risk 60 ticks. By 1 November basis risk will fall by 5/7, leaving 17. 1. Stock market indexes. Dow Jones Industrial Average List . http://money.cnn.com/data/dow30/. S&P 500 Complete list . http://nyjobsource.com/sandp1.html. NASDAQ . http://en.wikipedia.org/wiki/Nasdaq_Composite. Interest Rate. principle. interest payment. interest rate = payment/principle. (these days often daily, but expressed as a yearly equivalent). Future Value: The future value of 100 at r% for t years is the amnt of money you will have in t years if invested at r%: principle*(1 r)^t. In Perfect Markets. Capital Structure is irrelevant. Risks of debt and equity (beta’s) are affected by leverage. EPS risk changes with capital structure. WACC (used to calculate firm value) not affected. Banks customers) Banks delaers Securities firms Insurance Companies Pensions, Asset managements Investment trusts, Hedge funds Corporates, others Interbank Transactions The numbers represent the pro BankscustomersBanksdelaersSecuritiesfirmsInsurance CompaniesPensions Asset managementsInvestment trustsHedge fundsCorporates othersInterbank TransactionsThe numbers represent the proportion of NonIBOR changing global setting. Mr. . Dooneshsingh Audit, Chief Policy Unit & . Mr. . Fadil . Dookhy. , Chief Reserve Management Unit. 14 July 2014. Monetary Policy Committee. Turnaround in monetary policy .