Given the following data below, when and by how much is the bank exposed to inte
ID: 2767017 • Letter: G
Question
Given the following data below, when and by how much is the bank exposed to interest rate risk? For each maturity or repricing interval, what changes in interest rates will be beneficial and which will be damanging, given the current portfolio position:
Chapter 7, Problem 8: Interest Rate Risk Analysis, page 249.
Output Area:
Coming
Next
Next
More than
Week
30 Days
31-90 Days
90 Days
Loans
$200.00
$300.00
$460.00
$525.00
Securities
$21.00
$26.00
$40.00
$70.00
Interest Sensitive Assets
$221.00
$326.00
$500.00
$595.00
Transaction deposits
$320.00
$0.00
$0.00
$0.00
Time Accounts
$100.00
$290.00
$196.00
$100.00
Money Market borrowings
$136.00
$140.00
$100.00
$65.00
Interest Sensitive Liabilities
$556.00
$430.00
$296.00
$165.00
GAP
($335.00)
($104.00)
$204.00
$430.00
Cumulative Gap
($335.00)
($439.00)
($235.00)
$195.00
Output Area:
Coming
Next
Next
More than
Week
30 Days
31-90 Days
90 Days
Loans
$200.00
$300.00
$460.00
$525.00
Securities
$21.00
$26.00
$40.00
$70.00
Interest Sensitive Assets
$221.00
$326.00
$500.00
$595.00
Transaction deposits
$320.00
$0.00
$0.00
$0.00
Time Accounts
$100.00
$290.00
$196.00
$100.00
Money Market borrowings
$136.00
$140.00
$100.00
$65.00
Interest Sensitive Liabilities
$556.00
$430.00
$296.00
$165.00
GAP
($335.00)
($104.00)
$204.00
$430.00
Cumulative Gap
($335.00)
($439.00)
($235.00)
$195.00
Explanation / Answer
The bank is exposed to the risk to the extent of difference in the asset and the liability.The gaps are
coming days =556 - 221 = - 335
30days = 430 - 326 = -104
31- 90 days = 296 - 500 = +204
Above 90days = 165 - 595 = +430
Total interest exposure = -335-104+204+430 =195
However, this exposure arises over a period of time, so this has to b pulled back at the risk free rate of return which gives the present value of the exposure
So, present value = value at T th time /( 1+ Rf)^t/365
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.