Interest rate management: risk and how to measure it

Article Abstract:

Corporate treasurers increasingly are attempting to manage interest rate risk as interest rates have become more volatile and many corporations are financing their funding requirements through short-term bank loans rather than issues of equity. There are two types of interest rate risk: basis risk, which is the result of differences of the bases on which interest rates for assets and liabilities are determined; and gap exposure, which is the result of differences in the repricing of assets and liabilities that are interest-rate sensitive during a period. The main gap management techniques used to measure interest rate risk include the maturity gap model, duration analysis, and simulation analysis. An explanation of the maturity gap model is presented.

United Kingdom, Accounting and auditing, Accounting, Interest rates

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Managing foreign exchange: better judgment

Article Abstract:

Foreign currency transactions usually go through the US dollar with the spread between the currency pair wider than the spread for each currency against the dollar. Accountants of a particular currency are usually domiciled in that country through nostros accounts. Corporate treasurers do not need to be foreign exchange experts but they should have a clear idea of which risks they need to cover. The treasurer should obtain two simultaneous quotations from different banks when making a foreign exchange transaction.

Analysis, Management, Foreign exchange, Eurocurrency market

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