The paper reveals that Banks and their supervisors have spent considerable time and effort in recent years developing systems for monitoring and managing interest rate risk. This special feature examines that specific component of interest rate risk arising from the possible effects of changes in market interest rates on bank...
This article estimates the historical time series of the natural rate of interest using a structural vector autoregressive model. This method returns plausible results and thus seems to be well designed for the estimation of the natural rate of interest. It shows that the natural rate exhibits quite substantial variability...
Interest rate swaps provide for a particularly interesting experiment. Unlike the commonly-used forward and futures contracts employed by firms to modify their currency and commodity cash flow exposures, interest rate swaps have cash flow implications at multiple times over the full life of the derivative contract. This paper examines the...
This white paper deals with a model, in which the interest rate is the passive reflection of currency-depreciation expectations. This paper shows how to adapt the KFG model to allow for an interest rate defense. It is shown that increasing domestic-currency interest rate makes domestic assets more attractive according to...
This paper studies the impact of interest rate and revenue variability on the decision to carry out an irreversible investment project. Given the generality of the considered valuation problem, it first provides a thorough mathematical characterization of the problem and develops some new results. Contrary to what previous literature has...
This paper revisits the relationship between the forward and the spot interest rate. In contrast to much of the literature the paper investigates the very short maturities. The "tomorrow next" rate is the forward interest rate, but has the same maturity as the overnight rate. The authors' estimate an asymmetry...
INTEREST-RATE DEVELOPMENTS DURING 2002 have been striking, and 2003 is likely to be an interest-rate adventure as well. INTEREST-RATE DEVELOPMENTS DURING 2002 have been striking, and 2003 is likely to be an interest-rate adventure as well.
An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will...
Dynamic term structure models DTSMs price interest rate derivatives based on the model implied fair values of the yield curve, ignoring any pricing residuals on the yield curve that are either from model approximations or market imperfections. This paper proposes a new framework that consistently prices both interest rates and...
CHARLOTTE, N.C. -- FairPoint Communications, Inc. (NYSE:FRP) ("FairPoint") announced today that it has entered into two additional interest rate swap agreements. These swap agreements, together with FairPoint's three existing interest rate swap agreements, will fix the interest rate on approximately 83% of FairPoint's floating rate debt at a blended rate...
This article explains basic rules of interest rates on credit-card debt that includes Interest rates are variable, Rates are higher than those for secured loans, Interest rates have a ceiling, Interest on credit card debt is not tax-deductible. Credit card rates are set by adding a spread, or margin, to...
Bond management strategies are based on interest rate anticipation, sector rotation and security selection. Strategies, which involve forecasting interest rates and altering a bond portfolio to take advantage of that forecast, are called Interest rate anticipation strategies. Interest rates are the most important factor in the pricing of bonds. The...
This article is about "Sensitivity to Market Risk" denoted by "S". This "S" component rates the degree of market risk taken, management's ability to identify, measure, monitor, and control that risk, and the financial support provided by earnings and capital. Primarily, market risk results from interest rate, foreign exchange rate,...
In this Paper, we suggest a new motivation for why central banks appear averse to reversing changes in their interest rate. We show, in a standard monetary model with forward-looking expectations, data uncertainty and parameter uncertainty, that there is a learning cost associated with interest rate reversals. A policy that...
By using this tool you can calculate estimated payments and interest for an adjustable rate loan, assuming a worst case scenario where the rate increases by the maximum amount allowed at each interval until it reaches the rate cap. Actual payment amounts depend on the true interest rate, which may...
WASHINGTON & CHARLESTON, W.Va. -- In light of the lower interest rate environment, United Bankshares, Inc. (NASDAQ: UBSI) today announced that it has prepaid certain Federal Home Loan Bank FHLB long-term advances. In addition, United terminated an interest rate swap associated with one of the advances. The prepayment of these...
This tool will calculate the interest rate of an existing mortgage or the interest rate you will need to get on a mortgage when you know; the total principal or amount borrowed, the number of monthly payments left to pay or that you will be paying and the amount of...
This paper argues that liquidity differences between government securities and short-term Eurodollar borrowings account for interest rate swap spreads. It then models the convenience of liquidity as a linear function of two mean-reverting state variables and values it. The interest rate swap spread for a swap of particular maturity is...
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