interest rate uncertainty and forward rates

... rate and interest rate policies 6 1.3.1 Types of interest rate 6 ● Simple Interest 6 ● Compound Interest 6 ● Amortized Rates 6 ● Fixed Interest 7 ● Variable Interest 7 ● Prime Rate 7 ● Discount Rates ... Government sets a certain interest rateand imposes common rates on the whole banking system and on the wholeeconomy ● Fixed interest rate policy: Fixed interest rate is the interest rate that the Centralbank ... OF INTEREST-RATE POLICY ON VIETNAM'S ECONOMY 15 2.1 Interest rate policy and interest rate channel in Vietnam 15 2.2 Impact of Interest rate policy 17 2.3 Expected impacts and changes in interest-rate

Ngày tải lên: 06/01/2022, 23:14

... exposes firms to interest rate risk Interest rate swaps eliminate both problems See Larry D Wall, *‘Interest Rate Swaps in an Agency Theoretic Model with Uncertain Interest Rates,’” Federal ... floating-rate interest to XYZ in exchange for fixed-rate interest If interest rates fall and XYZ subsequently defaults, the bank is left with an obligation to continue making the agreed upon fixed-rate ... floating- rate funds and swapping for the fixed-rate payments of the more creditworthy firm.! Interest rate swaps can also be used to reduce interest rate risk For example, savings and loan institutions

Ngày tải lên: 15/02/2014, 05:20

... of interest rates would change until the implicit forward rates equalled expectations of future rates Future interest rates are, of course, not known with certainty Nevertheless, if forward rates ... rate—the forward rate(2)of 7.77% now for borrowing in the future If there were no uncertainty about the path of future interest rates then forward rates would equal expected future interest rates ... rates, the expectations hypothesis andterm premia Forward rates are the interest rates for future periods that are implicitly incorporated within today’s interest rates for loans of different maturities

Ngày tải lên: 15/02/2014, 05:20

... transformation) because long-term interest rates tend to be higher than short-terminterest rates In this paper, we investigate the banks’ exposure to interest rate risk as well as their ings from ... banks’ interest rate risk From a financialstability point of view, they have to know what determines changes in banks’ exposure transforma-to interest rate risk and whether the interest rate regulation ... this standardized interest rate shock Currently,the standardized interest rate shock consists of two parts: a parallel upward shift of 130basis points (bp) in the entire term structure and a parallel

Ngày tải lên: 16/02/2014, 06:20

... argued thatretail bank rates are not completely responsive to money-marketrates since bank rates are tied to long-term market interest rateseven in the case of short-term bank rates From a different ... instance, Mojon (2000), Heinemann and Sch¨ uler (2002), Hofmann (2003), and Sander and Kleimeier (2004) reported that the long-run pass-through of mar- ket rates to interest rates on short-term loans ... imperfect interest ratepass-through, where retail lending rates are allowed to differ acrossregions Following Christiano and Eichenbaum (1992), Christiano,Eichenbaum, and Evans (2005), and Ravenna and

Ngày tải lên: 17/02/2014, 03:20

... However, the reduction in the interest rates charged to firms was significantly lower than that experienced by money market rates, and therefore the spread between the two rates, typically considered ... market rates after Lehman’s default, the level of interest rates paid on overdrafts was also significantly reduced This obviously lowered firms’ cost of financing in a period of weak demand and ... point of view Trang 6Since bank interest rates could be sluggish in adjusting, we analyze the interest rates on overdraft loans that are modified unilaterally and at very short intervals by credit

Ngày tải lên: 17/02/2014, 03:20

... correlation between interest rates and exchange rates Inflation effects on interest rates and exchange rates One simple channel linking interest rates and exchange rates is through the effects ... real and nominal interest rates and between real and nominal exchange rates This section develops this distinction and iden- tifies common factors affecting interest rates and exchange rates ... interest rates and exchange rates over the 1974-86 period can be explained by the behavior of their under- lying determinants Determinants of interest rates and exchange rates The interest rate

Ngày tải lên: 06/03/2014, 02:21

... (1996), which concentrates more on the reaction of a wide variety of interest rates and exchange rates to overall changes in the Bundesbank’s Lombard, discount, and repurchase rates, and does not examine ... Lombard and discount repurchase rates, rates on euro–deutsche mark deposits with maturities of day, and of 1, 3, 6, 12, and 24 months, and Frankfurt money-market rates for day and 1-, 3-, 6-, and ... official rates January 1985 10 Percent Lombard rate January 1990 3-month interest rate Discount rate Figure Lombard, Discount, and Market Interest Rates January 1995 ANTICIPATION IN CENTRAL BANK INTEREST

Ngày tải lên: 06/03/2014, 02:21

... spot, forwards, and swaps as the foreign exchange part of the survey Trading in forward rate agreements (FRAs), currency and interest rate swaps, foreign exchange options, and interest rate options ... contracts These other derivatives include forward rate agreements (FRAs), interest rate swaps, cross-currency rate swaps, and foreign exchange and interest rate options Turnover in these instruments ... the other derivatives markets covered by the survey (FRAs, interest rate swaps, cross-currency swaps, and foreign exchange and interest rate options) averaged $659 billion, up 9 percent See Chart

Ngày tải lên: 06/03/2014, 02:21

... intensity and interest rates In this section we consider a model with stochastic intensity and interest rates In this kind of models λ is a stochastic process but, conditional on the filtration generated ... of interest rates and of credit default swaps (CDS’s) Moreover, themodel retains free dynamics parameters that can be used to calibrate optiondata, such as caps for the interest rate market and ... forward rates, i.e f (t, T ) = t x α (u)du ) = A(t, T ; α) exp{−B(t, T ; α)x t } is the bond price formula for the basic CIR model, with LIBOR rate L(t, T ), forward LIBOR rates F (t, T, S) and

Ngày tải lên: 06/03/2014, 04:21

... Malaysia, Thailand, and Turkey using monthly data over the period 1980 to 2000 We use bank deposit rates and inter-bank rates when information on deposit rates is not available These rates are obtained ... there is expected to be a decline in interest rates Hence, the net impact of liberalization on emerging market interest rates and in turn the impact of interest rates on UIRP is an empirical question ... artificially low interest rates and liberalization was accompanied by domestic financial deregulation and/or increased freedom of emerging market residents to invest abroad, then domestic interest rates

Ngày tải lên: 06/03/2014, 14:20

... Selected Interest Rates and the Associated Interest Rate Surprises Percent Daily Target federal funds rate 5-year Treasury yield 1997 1999 2001 2003 2005 2007 (a) Selected Interest Rates Basis ... Bank Stock Returns to Changes in Interest Rates (By Bank Characteristics and the Usage of Interest Rate Derivatives) Interest Rate Surprise Variable × Interest Rate Surprise Level Swaps 0.212 ... quite sticky and, in many cases, the rates paid on these deposits respond very sluggishly to changes in market interest rates; see, for example, Hannan and Berger [1991] and Neumark and Sharpe...

Ngày tải lên: 17/02/2014, 03:20

... U.S and foreign short-term interest rates, and exchange rates in order to assess the effect of U.S monetary policy shocks on other variables in the SVARs Although the results for interest rates ... and the UK monetary policy process, see Bean (2001) and www.bankofengland.co.uk/monetarypolicy/ framework.htm These are published at www.bankofengland.co.uk Vol No Bank of England Interest Rate ... repo, rate and after that date in terms of the Bank rate We use the two names interchangeably Vol No Bank of England Interest Rate Announcements 213 analyses, we allow for a probabilistic and thus...

Ngày tải lên: 06/03/2014, 14:20

... expectations, monetary and fiscal policies and the value of the U.S dollar Other interest rates, including bank prime lending rates, home mortgage rates and corporate and municipal bond rates, tend to ... estimate of forward rates, option prices may move sharply when current spot rates are unchanged 13 Basic Strategies with Interest Rate Options Using options to implement interest rate strategies ... inversely related to interest rates An investor must be able to understand this inverse relationship between bond prices and yields That is, whenever interest rates rise, prices on outstanding Treasury...

Ngày tải lên: 06/03/2014, 14:20

... lower interest rates by issuing a longterm debt and swapping the fixed long-term riskfree interest rate for the short-term riskfree interest rate by using a floating-for-fixed interest rate swap ... conjunction with interest rate swaps in order to pay the least cost on debt consistent with interest rate expectations It shows that these firms use interest rate swaps, because interest rate swaps ... needs and faces economic exposure and interest rate uncertainty in different parts of the world In 1993, their interest rate swap portfolio included 45 interest rate swaps in different currencies...

Ngày tải lên: 15/03/2014, 14:20

... long-term interest rate follows Sweeny and Warga (1986) and Elyasiani and Mansun (1998) whom employ this measure as a proxy for innovations in the interest rate5 The change in the interest rate is ... stock returns and unexpected inflation is given by interest rates If movements in interest rates result primarily from changes in inflationary expectations as Fama (1975, 1976) and Fama and Gibbons ... relationship with interest rate changes (Flannery and James, 1984; Brewer and Lee, 1985; Scott and Peterson, 1986; Kane and Unal, 1988; Saunders and Yourougou, 1990; Kwan, 1991; Akella and Greenbaum,...

Ngày tải lên: 22/03/2014, 17:20

... demand schedule in a symmetric equilibrium is w= PH mcH , P (18) and the symmetric aggregate production function is X y = yH + yH = l (19) Exchange rates and foreign demand Following Gali and ... real interest rate (both in the sense R H and R ) is raised.3 Thus, given the constant world real interest rate r , a future real depreciation (x/x > 0) is implied by the real interest rate ... situation of high aggregate demand cures itself without change in the nominal interest rate As usual, high aggregate demand implies positive ination and a low real interest rate In the present model,...

Ngày tải lên: 22/03/2014, 17:20

... markets, and falling international rates have resulted in a significant decline in interest rates in the last five years Currently, interest rates in India are at historical lows The drop in interest ... advise banks to use forward rate agreements and interest rate swaps to hedge interest rate risks, these markets are quite shallow The market for exchange-traded interest rate derivatives has ... debate The easing of controls on interest rates has led to higher interest rate volatility in India Hence, there is a need to measure and monitor the interest rate exposure of Indian banks Using...

Ngày tải lên: 22/03/2014, 17:20

... Thus, with interest rates near zero policymakers will not be able to stave off recessionary shocks by lowering nominal and thereby real interest rates Even worse, with nominal interest rates constrained ... real interest rate; r∗ : equilibrium real interest rate; ew : trade-weighted real exchange rate; d : aggregate demand shock; l: long-term nominal interest rate; i : short-term nominal interest rate; ... additional effect on the nominal interest rate, and a negative interest rate prescribed by the interest rate rule cannot be implemented Orphanides and Wieland (2000) illustrate this point using recent...

Ngày tải lên: 22/03/2014, 23:20

... realized rising -rate environment 17 Target and acquirer positioning is related to the interest rate environment, particularly the level and trend in interest rates Targets’ interest- rate betas were ... intrastate economies, and capitalization, and the market-wide effects interest rates have on the relative supply and demand for banks In particular, the notion that lower interest- rates bring more ... positioned for falling rates in rising -rate environments (have a positive interest- rate beta), while acquirers would have been positioned for rising rates (have a negative interest- rate beta) We fail...

Ngày tải lên: 29/03/2014, 13:20