Interest rate risk management with debt issues: Evidence from Europe

Survival of the Interest Rate Based Debt Financing System

Evidence has been mounting (over the centuries) that the interest based debt financing regime is under ever increasing distress. All of the earlier crises whatever label they carried− exchange rate crisis or banking crisis – have been debt crises in essence. At the present, empirical research suggests that the debt-to-GDP ratio of the richest members of the G-20 threatens to touch 120% m...

Supervising Interest Rate Risk Management

made significant efforts to establish and improve their procedures for interest rate risk management, including using economic models of interest rates and related models of credit risk (Lopez 2001a, b).At the same time, bank supervisors worldwide, including the Federal Reserve, have been expanding their knowledge and oversight of interest rate risk management techniques. For example, U.S. bank...

Hedge Commitments and Agency Costs of Debt: Evidence from Interest Rate Protection Covenants and Accounting Conservatism

The impact of interest-rate subsidies on household long-term debt: Evidence from a large program.∗

The response of household borrowing to changes in the interest rate is a crucial parameter to understand whether or not monetary policy can promote household investment in housing, and what are the determinants of the consumption durables. We provide an estimate of this response by exploiting a reform in a large program in Portugal: “Credito BoniÞcado” (CB). The CB program was launched in 1986 ...

Integrating Interest Rate and Currency Risk Management

Building on recent arbitrage-based pricing innovations in finance, we demonstrate an integrated interest rate and currency risk evaluation and management approach. This approach is based on the six fundamental parameters of global money market risk, exchange rate standard deviation, interest rate standard deviations and the correlations across interest rates and currencies. Based on these param...