Time bins: Difference between revisions
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''Risk management''. | ''Risk management''. | ||
Intervals of time to repricing or final maturity. | Intervals of time to repricing or final maturity, used in gap analysis and reporting. | ||
In determining the interest rate risk associated with holding financial assets/liabilities it is necessary to determine the proportion of the total investment whose return/cost can be repriced at specific time intervals. | In determining the interest rate risk associated with holding financial assets/liabilities it is necessary to determine the proportion of the total investment whose return/cost can be repriced at specific time intervals. | ||
Thus a floating rate instrument whose rate is reset every 6 months will be in the 6-month time bin. | Thus a floating rate instrument whose rate is reset every 6 months will be in the 3-month to 6-month time bin. | ||
The longer the time interval, the wider the span of an individual time bin in the gap analysis. | |||
For example, the first three time bins in a gap report might be open maturity, overnight and greater than overnight up to one week. | |||
Later, wider time bins might include: 3-6 months, 6-12 months and one to two years. | |||
For interest rate risk purposes, the repricing date, rather than the final maturity, is relevant. | |||
In relation to liquidity risk, the final maturity is relevant. | In relation to liquidity risk, the final maturity is relevant. | ||
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* [[Interest rate risk]] | * [[Interest rate risk]] | ||
* [[Liquidity risk]] | * [[Liquidity risk]] | ||
* [[Repricing]] | |||
* [[Risk management]] | |||
[[Category:Identify_and_assess_risks]] | |||
Latest revision as of 21:19, 4 December 2023
Risk management.
Intervals of time to repricing or final maturity, used in gap analysis and reporting.
In determining the interest rate risk associated with holding financial assets/liabilities it is necessary to determine the proportion of the total investment whose return/cost can be repriced at specific time intervals.
Thus a floating rate instrument whose rate is reset every 6 months will be in the 3-month to 6-month time bin.
The longer the time interval, the wider the span of an individual time bin in the gap analysis.
For example, the first three time bins in a gap report might be open maturity, overnight and greater than overnight up to one week.
Later, wider time bins might include: 3-6 months, 6-12 months and one to two years.
For interest rate risk purposes, the repricing date, rather than the final maturity, is relevant.
In relation to liquidity risk, the final maturity is relevant.
Time bins are also known as time buckets.
