lecture 4

Question 1

what is IRR

Answer 1

interest rate risk is the current and future sensitivity of an institution profitability to adverse movements in interest rates

Question 2

sources of IRR

Answer 2

repricing risk
yield curve risk
basis risk
optionality

Question 3

factors that influence IRR

Answer 3

savers behavior
investor behavior
economic cycle
central banks
government lending
inflation expectation

Question 4

Monetary policy

Answer 4

check notes of lecture 4

Question 5

impact of Interest rates on market values

Answer 5

increase in interest rates decrease the market value and the opposite is also true

Question 6

can IRR be hedged using derivatives ?

Answer 6

yes : forward contract
future contract
interest rate swaps
interest rate options