Chap008金融机构管理课后题答案讲课教案.docx

Chap008金融机构管理课后题答案讲课教案.docx

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Chap008金融机构管理课后题答案讲课教案

Chap008金融机构管理课后题答案

ChapterEight

InterestRateRiskI

ChapterOutline

Introduction

TheCentralBankandInterestRateRisk

TheRepricingModel

∙Rate-SensitiveAssets

∙Rate-SensitiveLiabilities

∙EqualChangesinRatesonRSAsandRSLs

∙UnequalChangesinRatesonRSAsandRSLs

WeaknessesoftheRepricingModel

∙MarketValueEffects

∙Overaggregation

∙TheProblemofRunoffs

∙CashFlowsfromOff-BalanceSheetActivities

TheMaturityModel

∙TheMaturityModelwithaPortfolioofAssetsandLiabilities

WeaknessoftheMaturityModel

Summary

Appendix8A:

TermStructureofInterestRates

∙UnbiasedExpectationsTheory

∙LiquidityPremiumTheory

∙MarketSegmentationTheory

SolutionsforEnd-of-ChapterQuestionsandProblems:

ChapterEight

1.WhatwastheimpactoninterestratesoftheborrowedreservestargetingregimeusedbytheFederalReservefrom1982to1993?

Thevolatilityofinterestrateswassignificantlylowerthanunderthenonborrowedreservestargetregimeusedinthethreeyearsimmediatelypriorto1982.Figure8-1indicatesthatboththelevelandvolatilityofinterestratesdeclinedevenfurtherafter1993whentheFeddecidedthatitwouldtargetprimarilythefedfundsrateasaguideformonetarypolicy.

2.Howhastheincreasedleveloffinancialmarketintegrationaffectedinterestrates?

Increasedfinancialmarketintegration,orglobalization,increasesthespeedwithwhichinterestratechangesandvolatilityaretransmittedamongcountries.TheresultofthisquickeningofglobaleconomicadjustmentistoincreasethedifficultyanduncertaintyfacedbytheFederalReserveasitattemptstomanageeconomicactivitywithintheU.S.Further,becauseFIshavebecomeincreasinglymoreglobalintheiractivities,anychangeininterestratelevelsorvolatilitycausedbyFederalReserveactionsmorequicklycreatesadditionalinterestrateriskissuesforthesecompanies.

3.Whatistherepricinggap?

Inusingthismodeltoevaluateinterestraterisk,whatismeantbyratesensitivity?

Onwhatfinancialperformancevariabledoestherepricingmodelfocus?

Explain.

Therepricinggapisameasureofthedifferencebetweenthedollarvalueofassetsthatwillrepriceandthedollarvalueofliabilitiesthatwillrepricewithinaspecifictimeperiod,whererepricemeansthepotentialtoreceiveanewinterestrate.Ratesensitivityrepresentsthetimeintervalwhererepricingcanoccur.Themodelfocusesonthepotentialchangesinthenetinterestincomevariable.Ineffect,ifinterestrateschange,interestincomeandinterestexpensewillchangeasthevariousassetsandliabilitiesarerepriced,thatis,receivenewinterestrates.

4.Whatisamaturitybucketintherepricingmodel?

Whyisthelengthoftimeselectedforrepricingassetsandliabilitiesimportantwhenusingtherepricingmodel?

Thematuritybucketisthetimewindowoverwhichthedollaramountsofassetsandliabilitiesaremeasured.Thelengthoftherepricingperioddetermineswhichofthesecuritiesinaportfolioarerate-sensitive.Thelongertherepricingperiod,themoresecuritieseithermatureorneedtoberepriced,and,therefore,themoretheinterestrateexposure.Anexcessivelyshortrepricingperiodomitsconsiderationoftheinterestrateriskexposureofassetsandliabilitiesarethatrepricedintheperiodimmediatelyfollowingtheendoftherepricingperiod.Thatis,itunderstatestheratesensitivityofthebalancesheet.Anexcessivelylongrepricingperiodincludesmanysecuritiesthatarerepricedatdifferenttimeswithintherepricingperiod,therebyoverstatingtheratesensitivityofthebalancesheet.

5.Calculatetherepricinggapandtheimpactonnetinterestincomeofa1percentincreaseininterestratesforeachofthefollowingpositions:

∙Rate-sensitiveassets=$200million.Rate-sensitiveliabilities=$100million.

Repricinggap=RSARSL=$200$100million=+$100million.

∆NII=（$100million）（.01）=+$1.0million,or$1,000,000.

∙Rate-sensitiveassets=$100million.Rate-sensitiveliabilities=$150million.

Repricinggap=RSARSL=$100$150million=-$50million.

∆NII=（-$50million）（.01）=-$0.5million,or-$500,000.

∙Rate-sensitiveassets=$150million.Rate-sensitiveliabilities=$140million.

Repricinggap=RSARSL=$150$140million=+$10million.

∆NII=（$10million）（.01）=+$0.1million,or$100,000.

a.Calculatetheimpactonnetinterestincomeoneachoftheabovesituationsassuminga1percentdecreaseininterestrates.

∙∆NII=（$100million）（-.01）=-$1.0million,or-$1,000,000.

∙∆NII=（-$50million）（-.01）=+$0.5million,or$500,000.

∙∆NII=（$10million）（-.01）=-$0.1million,or-$100,000.

b.Whatconclusioncanyoudrawabouttherepricingmodelfromtheseresults?

TheFIsinparts

（1）and（3）areexposedtointerestratedeclines（positiverepricinggap）whiletheFIinpart

（2）isexposedtointerestrateincreases.TheFIinpart（3）hasthelowestinterestrateriskexposuresincetheabsolutevalueoftherepricinggapisthelowest,whiletheoppositeistrueforpart

（1）.

6.Whatarethereasonsfornotincludingdemanddepositsasrate-sensitiveliabilitiesintherepricinganalysisforacommercialbank?

Whatisthesubtle,butpotentiallystrong,reasonforincludingdemanddepositsinthetotalofrate-sensitiveliabilities?

Canthesameargumentbemadeforpassbooksavingsaccounts?

Theregulatoryrateavailableondemanddepositaccountsiszero.AlthoughmanybanksareabletoofferNOWaccountsonwhichinterestcanbepaid,thisinterestrateseldomischangedandthustheaccountsarenotreallysensitive.However,demanddepositaccountsdopayimplicitinterestintheformofnotchargingfullyforcheckingandotherservices.Further,whenmarketinterestratesrise,customersdrawdowntheirDDAs,whichmaycausethebanktousehighercostsourcesoffunds.Thesameorsimilarargumentscanbemadeforpassbooksavingsaccounts.

7.Whatisthegapratio?

Whatisthevalueofthisratiotointerestrateriskmanagersandregulators?

Thegapratioistheratioofthecumulativegappositiontothetotalassetsofthebank.Thecumulativegappositionisthesumoftheindividualgapsoverseveraltimebuckets.Thevalueofthisratioisthatittellsthedirectionoftheinterestrateexposureandthescaleofthatexposurerelativetothesizeofthebank.

8.Whichofthefollowingassetsorliabilitiesfittheone-yearrateorrepricingsensitivitytest?

91-dayU.S.TreasurybillsYes

1-yearU.S.TreasurynotesYes

20-yearU.S.TreasurybondsNo

20-yearfloating-ratecorporatebondswithannualrepricingYes

30-yearfloating-ratemortgageswithrepricingeverytwoyearsNo

30-yearfloating-ratemortgageswithrepricingeverysixmonthsYes

OvernightfedfundsYes

9-monthfixedrateCDsYes

1-yearfixed-rateCDsYes

5-yearfloating-rateCDswithannualrepricingYes

CommonstockNo

9.ConsiderthefollowingbalancesheetforWatchoverUSavings,Inc.（inmillions）:

AssetsLiabilitiesandEquity

Floating-ratemortgagesDemanddeposits

（currently10%annually）$50（currently6%annually）$70

30-yearfixed-rateloansTimedeposits

（currently7%annually）$50（currently6%annually$20

Equity$10

TotalAssets$100TotalLiabilities&Equity$100

a.WhatisWatchoverU’sexpectednetinterestincomeatyear-end?

Currentexpectedinterestincome:

$5m+$3.5m=$8.5m.

Expectedinterestexpense:

$4.2m+$1.2m=$5.4m.

Expectednetinterestincome:

$8.5m$5.4m=$3.1m.

b.Whatwillbethenetinterestincomeatyear-endifinterestratesriseby2percent?

Afterthe200basispointinterestrateincrease,netinterestincomedeclinesto:

50（0.12）+50（0.07）70（0.08）20（.06）=$9.5m$6.8m=$2.7m,adeclineof$0.4m.

c.Usingthecumulativerepricinggapmodel,whatistheexpectednetinterestincomefora2percentincreaseininterestrates?

Wachovia’s'repricingorfundinggapis$50m$70m=$20m.Thechangeinnetinterestincomeusingthefundinggapmodelis（$20m）（0.02）=$.4m.

d.Whatwillbethenetinterestincomeatyear-endifinterestratesincrease200basispointsonassets,butonly100basispointsonliabilities?

Isitreasonableforchangesininterestratestoaffectbalancesheetinanunevenmanner?

Why?

Aftertheunbalancedrateincrease,netinterestincomewillbe50（0.12）+50（0.07）70（0.07）20（.06）=$9.5m$6.1m=$3.4m,anincreaseof$0.3m.Itisnotuncommonforinterestratestoadjustinanunevenmannerovertwosidesofthebalancesheetbecauseinterestratesoftendonotadjustsolelybecauseofmarketpressures.Inmanycasesthechangesareaffectedbydecisionsofmanagement.Thusyoucanseethedifferencebetweenthisanswerandtheanswerforparta.

10.Whataresomeoftheweaknessoftherepricingmodel?

Howhavelargebankssolvedtheproblemofchoosingtheoptimaltimeperiodforrepricing?

Whatisrunoffcashflow,andhowdoesthisamountaffecttherepricingmodel’sanalysis?

Therepricingmodelhasfourgeneralweaknesses:

（1）Itignoresmarketvalueeffects.

（2）Itdoesnottakeintoaccountthefactthatthedollarvalueofratesensitiveassetsandliabilitieswithinabucketarenotsimilar.Thus,ifassets,onaverage,arerepricedearlierinthebucketthanliabilities,andifinterestratesfall,FIsaresubjecttoreinvestmentrisks.

（3）Itignorestheproblemofrunoffs,thatis,thatsomeassetsareprepaidandsomeliabilitiesarewithdrawnbeforethematuritydate.

（4）Itignoresincomegeneratedfromoff-balance-sheetactivities.

Largebanksareabletorepricesecuritieseverydayusingtheirowninternalmodelssoreinvestmentand