Topic 03A Selected Slides -- Interest-Rate Essentials

Topic 03A Selected Slides -- Interest-Rate Essentials -...

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INS 3650 / 5550 FINS 3650 / 5550 International Banking Semester 2, 2011 Dr Bruce R Arnold bruce.arnold@unsw.edu.au Re: FINSXX50 z3121234 [Topic]
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Maturity Transformation and Interest-Rate Risk
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his Evening’s Lecture This Evening s Lecture Interest-rate basics he yield curve The yield curve Interest-rate swaps and the swap curve Duration and the zero-coupon curve Measuring interest-rate risk edging interest te risk Hedging interest-rate risk
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et Present Value Net Present Value NPV Factor t Net Present Value Σ
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he Yield Curve The Yield Curve Equilibrium: indifference between different rates/maturities at a point in time Yield Yield Negatively Sloped ("Inverted") Positively Sloped ("Normal") Yield Maturity Maturity
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erm Structure of Interest Rates Term Structure of Interest Rates An investor should be indifferent between (1) investing long and (2) investing short and rolling.
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erm Structure of Interest Rates Term Structure of Interest Rates Term Rate $100 Invested: 5 Years 5.00% $132.77 0 Years 10% 182 37 10 Years 6.10% $182.37 5-year rate, 5 years forward 6.45%
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Topic 03A Selected Slides -- Interest-Rate Essentials -...

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