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The Management Of Interest Rate Risk In Small And Medium Banks

Author

Listed:
  • HALID KONJHODŽIC

    () (University of Dubrovnik, Department for Economy and Business Economy, Croatia)

  • TONCI SVILOKOS

    () (University of Dubrovnik, Department for Economy and Business Economy, Croatia)

Abstract

The business banks make its decisions in the condition of certainty, risk and uncertainty. The risk is a condition when the possibility of every event is known. The risk can be measured with distribution of probabilities. The risk of interest rate is one of the main risks that bank have. They can suffer unfavourable changes of active and passive interest rates. The changes of interest rates have various influences on bank balance statement and on bank market value, so it is necessary to anticipate and to develop the methods to measure the risk and to manage the risk of interest rate. In theory and in practice there are various methods that use small and medium banks to manage the interest rates risk and this paper investigate the methods such are the management of assets and liabilities gap, the analysis of average time deposits, the futures contracts, options on interest rates and interest swap.

Suggested Citation

  • Halid Konjhodžic & Tonci Svilokos, 2005. "The Management Of Interest Rate Risk In Small And Medium Banks," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
  • Handle: RePEc:bbn:journl:2005_2_3_konjhodzic
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    File URL: http://tbs.ubbcluj.ro/RePEc/bbn/journl/2005_2_3_Konjhodzic.pdf
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    More about this item

    Keywords

    Interest rate risk; risk management; assets and liabilities gap; the analysis of average time deposits; futures; options; interest swap;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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