AFF 704 Chapter Notes - Chapter 8: Interest Expense, Demand Deposit, Interest Rate
1 Jun 2017
School
Department
Course
Professor
Document Summary
Fis often mismatch the maturities of their assets and liabilities which exposes themselves to interest rate risk and could become economically insolvent if interest rates change unexpectedly. Simpler method used to measure an fi"s interest rate risk is the repricing model / funding gap: which concentrates on the impact of interest rate changes on an fi"s net income: simple but has some serious weaknesses. The market value-based maturity model: rarely used includes the impact of interest rate changes on an. Most direct factor is the central bank"s monetary policy strategy. Interest rates affect an fi"s cost of funds and return on assets (roa) Boc carries out monetary policy actions based on a target range for inflation. Inflation measure used is the consumer price index (cpi): a measure of the cost of living tracked monthly by statistics canada based on changes in the retail prices of a basket of consumer goods and services.
