Silver bullet and Interest rate risk: Difference between pages

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A simple and seemingly magical solution to a complex problem.
(IRR).


The risk associated with a change in interest rates.


:<span style="color:#4B0082">'''''No silver bullet'''''</span>


:"[The FCA] concluded that there is no silver bullet that will mitigate the problem."
This may take several forms in the treasury context.


:''The Treasurer, June 2016, page 6.''
For example, and depending on the direction of the change:
*Increasing interest cost
*Falling interest income
*Changing market value of debt, or of pension liabilities
*Differences in competitiveness
*The changing nature of a market when interest rates change
*Secondary effects, especially potentially adverse effects, resulting from any of the primary effects above. For example, potential breaches of interest cover covenants.




The term originates from the myths that silver bullets were the only form of weapon effective against werewolves and certain other monsters.
Sometimes written 'interest-rate risk'.
 
Not to be confused with Internal Rate of Return, which is also abbreviated to ''IRR''.




== See also ==
== See also ==
* [[Bullet maturity]]
* [[Asset-liability management]]
*[[Complex problem]]
* [[Cross-currency interest rate swap]]
* [[Sterling]]
* [[Double-whammy]]
* [[Duration]]
* [[Exposure]]
* [[Fair value interest rate risk]]
* [[Financial covenant]]
* [[Forward rate agreement]]
* [[Guide to risk management]]
* [[Internal rate of return]]
* [[Interest cover]]
* [[Interest rate]]
* [[Interest rate cap]]
* [[Interest rate collar]]
* [[Interest rate exposure]]
* [[Interest rate floor]]
* [[Interest rate futures]]
* [[Interest rate gap]]
* [[Interest rate guarantee]]
* [[Interest rate option]]
* [[Interest Rate Risk in the Banking Book]]  (IRRBB)
* [[Interest rate shock]]
* [[Interest rate swap]]
* [[IRHP]]
* [[Matching]]
* [[Pipeline risk]]
* [[Portfolio hedging]]
* [[Risk-free rate of return]]
* [[Risk-free rates]]
* [[Shock]]
* [[Time bins]]
* [[Treasury]]
 
 
== Other resource ==
 
[[Media:2015_05_May_-_The_devil_is_in_the_detail.pdf| The devil is in the detail, The Treasurer, 2015]]


[[Category:Knowledge_and_information_management]]
[[Category:Manage_risks]]

Latest revision as of 06:49, 19 March 2024

(IRR).

The risk associated with a change in interest rates.


This may take several forms in the treasury context.

For example, and depending on the direction of the change:

  • Increasing interest cost
  • Falling interest income
  • Changing market value of debt, or of pension liabilities
  • Differences in competitiveness
  • The changing nature of a market when interest rates change
  • Secondary effects, especially potentially adverse effects, resulting from any of the primary effects above. For example, potential breaches of interest cover covenants.


Sometimes written 'interest-rate risk'.

Not to be confused with Internal Rate of Return, which is also abbreviated to IRR.


See also


Other resource

The devil is in the detail, The Treasurer, 2015

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