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Interest Rate Risk

Fri Sep 07, 2012

Interest Rate Risk has become the subject of significant scrutiny within the banking community over the past few years as the economic climate has changed. Capitalytics is extremely sensitive to the needs of banks to not only perform interest rate risk analysis as part of their regulatory examinations, but also use it as a tool to help banks prepare for additional changes in the environment and maximize their profitability based on expected trends in market rates.

We have elaborated in several of our recent blog posts about the capabilities of our Cashflow Simulation Engine, particularly its robustness and ability to provide results at a level of granularity and accuracy above and beyond what is available from simple analytic techniques. This has two main benefits when analyzing your bank's interest rate risk.

  1. Our simulation-based approach allows for arbitrarily detailed analysis of how specific financial instruments will react to interest rate fluctuations in light of floors, caps, and other subtle nuances that may be offered as part of these instruments. We can also easily and correctly deploy new "flavors" of instruments in which your bank may participate, regardless of their nature.
  2. Our approach also removes the limitations of publicly available yield curves (e.g., LIBOR, swap curves, etc.) Many correspondent banks and other services do not allow for banks to grow in their sophistication by not integrating their third-party reports with the curves that may be most beneficial. But Capitalytics, on the other hand, is able to receive and make use of periodic updates to the yield curves that your bank would like to use as part of their business -- or to temporarily or permanently use functions of publicly available curves (e.g., "WSJ published Prime Rate + 25 bp") in order to provide the knowledge that today's bankers need to survive and thrive.

We maintain a sample bank as part of an openly available demonstration of our capabilities, including interest rate risk analysis and reporting, here. Click the tab labeled "Cashflow Reports" to see the selection panel for our reports. Contact us today to discuss how we can help your bank.