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Interest Rate Risk Management In Banking

Author

Listed:
  • Lect. Ph.D Imola Driga
  • Lect. Ph.D Anca Jarmila Guta
  • Lect. Ph.D Dorina Nita

    (University of Petrosani, Faculty of Sciences, Petrosani, Romania)

Abstract

Financial intermediation often exposes banks to interest rate risks by creating mismatches in the maturity structure and re-pricing terms of their assets and liabilities. The interest rate risk is along with the liquidity risk a fundamental risk associated to the management of bank resources. Both types of risk are caused by the uncertainty regarding the way depositors may withdraw their investments in case of interest rate variation, on one hand, and by the uncertainty that involves the interest rate paid by the commercial bank to its customers in order to attract and keep funds in form of deposits, on the other hand. The interest rate risk expresses the loss registered by the bank because of the unexpected evolution of the interest rate.

Suggested Citation

  • Lect. Ph.D Imola Driga & Lect. Ph.D Anca Jarmila Guta & Lect. Ph.D Dorina Nita, 2010. "Interest Rate Risk Management In Banking," Revista Tinerilor Economisti (The Young Economists Journal), University of Craiova, Faculty of Economics and Business Administration, vol. 1(14), pages 41-48, April.
  • Handle: RePEc:aio:rteyej:v:1:y:2010:i:14:p:41-48
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    File URL: http://feaa.ucv.ro/RTE/014-6.pdf
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    References listed on IDEAS

    as
    1. Lipsey, Richard G. & Harbury, C. D., 1993. "First Principles of Economics," OUP Catalogue, Oxford University Press, edition 2, number 9780297821205.
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    More about this item

    Keywords

    interest rate risk; sensitive assets and liabilities; assests-liabilities management; GAP analysis;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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