Question
Suppose the balance sheet of the bank is the following one: Assets: mortgage 2 years zero-coupon 100 USD (rate 4%, convexity: 25) Liabilities and equity:
- Suppose the balance sheet of the bank is the following one:
Assets: mortgage 2 years zero-coupon 100 USD (rate 4%, convexity: 25)
Liabilities and equity: Deposits 1 year zero coupon 75 USD (rate 2.5%, convexity and equity 25 USD
Estimate the impact of a 25 bps increase on the bank value applying the convexity gap approach.
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The Risk Modeling Evaluation Handbook Rethinking Financial Risk Management Methodologies In The Global Capital Markets
Authors: Greg Gregoriou, Christian Hoppe, Carsten Wehn
1st Edition
0071663703, 978-0071663700
