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Interest rate risk in the banking book : a best practice guide to management and hedging /

"Asset Liability Management, the practice of matching the term structure and cash flows of an organization's asset and liability portfolios to maximize returns and minimize risk, is a key component of any financial institution's overall operating strategy. Due to a heavily regulated l...

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Bibliographic Details
Main Author: Lubinska, Beata, 1973- (Author)
Format: eBook
Language:English
Published: Chichester, West Sussex, United Kingdom : John Wiley & Sons, Ltd., 2022.
Subjects:
Interest rate risk.
Asset-liability management.
Banks and banking.
Electronic books.
Online Access:Connect to the full text of this electronic book
Table of Contents:
  • Cover
  • Title Page
  • Copyright Page
  • Contents
  • Preface
  • About the Website
  • Introduction
  • Chapter 1 What is IRRBB and why is it important?
  • Subcategories of interest rate risk
  • Repricing risk (gap risk)
  • Yield risk
  • Optionality risk
  • Basis risk
  • Regulatory overview for IRRBB
  • what has changed?
  • ECB 2017 IRRBB stress test
  • Interest rate shocks
  • Oil Supply Crisis
  • HY/LBO/Default Risk
  • Inflation expectations
  • Great Bond Massacre
  • 94
  • Chapter 2 How to identify and measure Interest Rate Risk in the Banking Book
  • Identification of IRRBB
  • case studies of the exposure to IRRBB
  • The dual nature of IRRBB
  • Exposure to short-terminterest rate risk
  • maturity gap analysis
  • Maturity gap analysis according to the advanced approach
  • Brief comparison of two approaches: the basic maturity gap and the advanced repricing gap
  • Two different ways of looking at the maturity gap
  • Repricing gap analysis and refixing gap analysis
  • Maturity gap analysis from the economic value perspective
  • Time bucket sensitivity analysis
  • PV01
  • Duration gap analysis
  • Limits of duration gap analysis
  • IRRBB metrics
  • Earnings at Risk (EaR)
  • Net Interest Income sensitivity
  • delta NII
  • Present Value under + 1 bp parallel curve shift (PV01)
  • Value at Risk (VaR)
  • Credit Spread Risk in the Banking Book (CSRBB)
  • Chapter 3 How to manage IRRBB
  • Hedging instruments for IRRBB
  • Forward starting swaps
  • Interest rate options
  • caps, floors and swaptions
  • Why consider interest rate swaps?
  • Natural hedging and hedging through derivatives
  • Hedging strategies
  • Blended rate strategy (also known as partial hedge)
  • Interest rate cap and floor
  • Forward rate lock
  • Chapter 4 Behaviouralisation of items without deterministic maturity and their impact on IRRBB.
  • The significance and impact of behavioural issues in the banking book
  • The reason for modelling CASA under IRRBB
  • The impact of early redemption of fixed rate assets on IRRBB
  • Basic approaches for the modelling of NMDs
  • Balance sensitivity modelling
  • Basic approaches for the modelling of statistical prepayment on the asset side
  • Statistical prepayments
  • Financial prepayments
  • Model risk
  • Chapter 5 Interest rate risk and asset liability management
  • Management of IRRBB under strategic ALM
  • proactive management of IRRBB
  • Introduction to integrated management of interest rate risk and liquidity risk
  • Introduction to strategic FTP
  • Setting up the target profile and integrated management of liquidity and interest rate risk through the application of numerical optimisation technique
  • Introduction to the optimisation concept
  • Setting up the funding strategy for a bank taking into consideration the hedging requirements
  • Hedging and funding strategies under holistic view
  • IRRBB and funds transfer pricing
  • Pricing of different products on the banking book
  • Behaviouralisation concept in FTP
  • Comprehensive and feasible IRRBB strategy
  • Management of the intragroup interest rate risk
  • Chapter 6 IRRBB stress test, reverse stress test and ICAAP
  • IRRBB stress testing
  • IRRBB stress testing methodology
  • IRRBB stress test description
  • ICAAP
  • assessment of the internal capital to cover IRRBB
  • Chapter 7 IRRBB governance and framework
  • Risk Appetite Statement (RAS)
  • Appendix 1: Example of IRRBB policy aligned with the requirements of BCBS Standards
  • IRRBB Key Metrics and Measurement Processes
  • IRRBB Risk Appetite Limits
  • IRRBB Escalation and Reporting Process
  • Appendix 2: Example of IRRBB model manual
  • A) The Purpose of the Model
  • B) Coverage
  • C) Scope
  • D) Description of the Measurement Techniques.