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Stanford UniversityFINANCE 2434Chap007-APPROVED BY EXPERTS-DOWNLOAD TO SCORE A+

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CHAPTER 7 RISK MANAGEMENT FOR CHANGING INTEREST RATES: ASSET-LIABILITY MANAGEMENT AND DURATION TECHNIQUES Goals of This Chapter: The purpose of this chapter is to explore the options bankers have t... oday for dealing with risk – especially the risk of loss due to changing interest rates – and to see how a bank’s management can coordinate the management of its assets with the management of its liabilities in order to achieve the institution’s goals. Key Topic In This Chapter  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 Techniques Chapter Outline I. Introduction: The Necessity for Coordinating Bank Asset and Liability Management Decisions II. Asset-Liability Management Strategies A. Asset Management Strategy B. Liability Management Strategy C. Funds Management Strategy III. Interest Rate Risk: One of the Greatest Management Challenges A. Forces Determining Interest Rates B. The Measurement of Interest Rates 1. Yield to Maturity 2. Bank Discount Rate C. The Components of Interest Rates 1. Risk Premiums 2. Yield Curves 3. The Maturity Gap and the Yield Curve D. Responses to Interest Rate Risk 7-1 [Show More]

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