Repricing and Reset risk: Difference between pages

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(Create page - source - The Treasurer, December 2023, Issue 4, p30.)
 
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1.  ''Floating interest rates.''
''Floating interest rates - risk management - repricing risk.''


A change of the interest rate in a floating interest rate contract, in accordance with a pre-determined formula and observation of a prevailing market reference rate.
Reset risk is a type of repricing risk.


Repricing risk is the risk of adverse effects resulting from changes in floating interest rates.


2. ''Risk management.''
Reset risk is the additional risk resulting from a relevant reference rate being observed on a single day - and then incorporated into a longer contractual period.


Any other change in a market rate or price.
 
"There is [  ] no ‘reset risk’ in Risk Free Rates (RFRs) since the interest rate coupon will be reflective of market observations over the entire interest rate period, not just on the reset date."
 
''Pieter Bierkens, former chair of Australia's LIBOR reform working group - The Treasurer, December 2023 Issue 4, p30.''




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* [[Maturity ladder]]
* [[Maturity ladder]]
* [[Rate reset]]
* [[Rate reset]]
* [[Repricing ]]
* [[Repricing risk]]
* [[Repricing risk]]
* [[Reset risk]]
* [[Risk free rates]] (RFRs)
* [[Risk management]]
* [[Risk management]]


[[Category:Financial_products_and_markets]]
[[Category:Financial_products_and_markets]]
[[Category:Identify_and_assess_risks]]

Revision as of 22:02, 4 December 2023

Floating interest rates - risk management - repricing risk.

Reset risk is a type of repricing risk.

Repricing risk is the risk of adverse effects resulting from changes in floating interest rates.

Reset risk is the additional risk resulting from a relevant reference rate being observed on a single day - and then incorporated into a longer contractual period.


"There is [ ] no ‘reset risk’ in Risk Free Rates (RFRs) since the interest rate coupon will be reflective of market observations over the entire interest rate period, not just on the reset date."

Pieter Bierkens, former chair of Australia's LIBOR reform working group - The Treasurer, December 2023 Issue 4, p30.


See also