Interest rate risk of German financial institutions: the impact of level, slope, and curvature of the term structure

Interest rate risk of German financial institutions: the impact of level, slope, and curvature of... We investigate here the sensitivity of the equity values of a large sample of German financial institutions to movements in the term structure of interest rates. While similar approaches rely on a single interest rate factor only, we quantify the exposure to changes in level, slope, and curvature, which are the driving factors of term structure changes. Our main findings are: (i) banks and insurances are exposed to level and curvature changes but only marginally to slope movements; (ii) the interest rate risk exposure depends on the banking sector investigated; (iii) level and curvature changes are priced in the cross-section of stock returns. Review of Quantitative Finance and Accounting Springer Journals

Interest rate risk of German financial institutions: the impact of level, slope, and curvature of the term structure

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Springer US
Copyright © 2009 by Springer Science+Business Media, LLC
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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