Search: "interest rate risk"

If My Investment Strategy Hasn’t Changed, Then My Interest Rate Risk Hasn’t Changed—Right?

  We often are asked “If I keep my investment strategy the same through various rate cycles, won’t my interest rate risk be the same?’’ The answer is no. Let’s take a simple example of a 5-year bullet purchased in June of 2013 compared to a 5-year bullet purchased in June of 2007. As of […]

Understanding Interest Rate Risk is Not a Static Issue

NCUA’s Interest Rate Risk Questionnaire – Starting the Conversation

More institutions are being presented with NCUA’s Interest Rate Risk Questionnaire in advance of examinations and being asked to fill them out. During the preparation for an examination, this may seem like the last thing a busy management team should be concerned with, but it should be taken as an opportunity to refresh credit union […]

Interest Rate Risk Prepayment Assumptions Vs. Observed Behavior

When you or your examiner are evaluating assumptions used in your A/LM model to quantify interest rate risk (IRR), is the objective to prove the assumptions are right?  Or, is it to prove that the assumptions are reasonable and (when possible) supportable?  According to NCUA’s IRR Questionnaire, the answer is you and the examiner “should […]

Interest Rate Risk Modeling—Do The Results Make Sense?

Many credit unions are increasing the number of “What-Ifs” they run. It is important that decision-makers do a gut check on the results being presented.  It is also important to understand that various modeling methodologies may need to be used to ensure appropriate evaluation of the decision. Take, for instance, a decision to expand auto lending […]

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