Risks of change of interest are fortune risks market-due to the interest rate, which arise either in the form of interest surplus and/or without and/or market value risks.

Analysis of the risk of change of interest

Factors of influence

The substantial factors of influence of the risk of change of interest can be summarized two generic terms. On the one hand the risk of change of interest depends on the interest Exposure (internal component), on the other hand on the (external component).

The interest Exposure summarizes enterprise-internal factors like the open fixed interest position, the expirations of period and the interest elasticity. The represents interest level changes and turns of the interest structure. The more pronouncedly these two factors arise, i.e. the more largely for example the fixed interest position in the comparison to the variable interest position is or the more strongly the Zinsniveau shifts, all the more highly is under otherwise same conditions also the risk of change of interest.

Instruments to the interest rate risk analysis

The instruments to the interest rate risk analysis can be differentiated on the one hand according to whether they are developed and used primarily for the analysis of the interest surplus risk or the bar value risk. Beyond that a distinction is possible after static or dynamic beginnings. While the static beginnings are deadline-referred and usually also only the interest business already contracted to this deadline considers, with the dynamic beginnings also new and connection business are integrated into the analysis. The static instruments aim therefore particularly at the operational business. Dynamic beginnings are suitable against it in particular for strategic risk analyses.

Interest surplus and/or interest margin risks

If one regards the long-term development of the interest margins of a major bank, a savings bank and a loan bank on basis of the Federal Bank statistics, then one determines varying interest margins in timing strongly.

Interest margins of selected bankers' syndicates in the period 1970 to 2000

While the interest margins of the savings banks and the loan banks in this period exhibited a Stardardabweichung of 0,30 to 0.34 per cent points, them amounted to scarce with the major banks 0.56% - points. Obviously the risk of change of interest was more pronounced with the major banks. A view of the Variationskoeffizienten as relative control measure strengthens this impression still.

Factors of influence and forms of the interest surplus risk

The substantial effect connections can be clarified with the help of a view of balance, whereby the connections possess validity in the same way also for the business except-relating to the balance.

The entire interest business of a credit institute can be divided into two layers, which differ according to their adaptability to arising changes of market interest:

Fixed interest business

These business covers all positions, which exhibit a firmly agreed upon and in its height constant Zinsatz for a certain period.

Variable interest business

These interest business does not possess either interest connection duration or but only a very short. Thus these business is partial and/or full zinsreagibel.

Interest surplus risks develop whenever between the Aktivi and passive positions no interest connection congruence exists. Arising Inkongruenzen leads temporally open positions to appropriate betraglich or.

The classical case of the interest surplus risk is the fixed interest risk in such a way specified. This develops, if a fixed interest block on the assets side is financed by a variable interest-bearing position on the passive side of the balance (risk with rising market interest) or turned around one variablel interest-bearing position on the assets side by a fixed interest position on the passive side is financed (risk with sinking market interest).

Interest connection balance

The interest connection balance is an instrument, with which risks of change of interest can be identified and quantified. It was used in particular in the 70's and with the interest rise at the beginning 80's increasingly for the analysis of the risk of change of interest in credit institutes. To the consequence of the inclinations of individual institutes resulting from the high interest phase the Federal Institution for supervision of financial service (short BaFin) for all banks introduced the obligation for the list of interest connection balances.

In the interest connection balance all aktivischen and passivischen fixed interest positions are confronted and determined for future periods the arising open positions. An open position, either as active overhang or as passive overhang means risk of change of interest.

As fixed interest business thereby business should be put to reason in Anlehnng to the BAFin, which exhibits a remainder interest connection of more than 180 days. Likewise this balance also those should does not zinsreagiblen active and liabilities without interest to consider.

Usually the interest connection balance in the statement of the interest surplus risk considers a market interest rise of 1% . I.e. the proven risk represents the amount in EUR, which the interest surplus will sink, if the Marktzinsnieveau rises around 1%.

Formal structure

The interest connection balance is part of the foreign trade balance. The following table shows an interest connection balance and the Gesamtbilan, which cover additionally the other market-interest-dependent business.

The interest connection balance has the disadvantage that a decrease can take place in relation to original expectation during a change of interest, although no fixed interest gap exists. The change agitates from the other market-dependent business.

Example of an interest connection balance

Thus an interest surplus risk occurs at a value of 8 units in the above case.

Criticism

Interest changes can affect the result negatively also if period congruence (agree the volumes regarding the remaining time on the active and the passive side) exists. This is on it that the variable active and passive interest rates differently changes.

Usually in practice an extension of the interest connection balance takes place by bar value considerations. The interest surplus risks of the following periods with the appropriate rate of discount are abgezinst (see for this bar value).

Balance of expiration of interest

Here the fixed interest existence are illustrated at several times.

Articles in category "Risk of change of interest"

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