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Interest Rate Risk in the Banking Book Beata Lubinska

Interest Rate Risk in the Banking Book By Beata Lubinska

Interest Rate Risk in the Banking Book by Beata Lubinska

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Interest Rate Risk in the Banking Book Summary

Interest Rate Risk in the Banking Book: A Best Practice Guide to Management and Hedging by Beata Lubinska

Introduces practical approaches for optimizing management and hedging of Interest Rate Risk in the Banking Book (IRRBB) driven by fast evolving regulatory landscape and market expectations.

Interest rate risk in the banking book (IRRBB) gained its importance through the regulatory requirements that have been growing and guiding the banking industry for the last couple of years. The importance of IRRBB is shifting for banks, away from 'just' a regulatory requirement to having an impact on the overall profitability of a financial institution. Interest Rate Risk in the Banking Book sheds light on the best practices for managing this importance risk category and provides detailed analysis of the hedging strategies, practical examples, and case studies based on the author's experience. This handbook is rich in practical insights on methodological approach and contents of ALCO report, IRRBB policy, ICAAP, Risk Appetite Statement (RAS) and model documentation. It is intended for the Treasury, Risk and Finance department and is helpful in improving and optimizing their IRRBB framework and strategy. By the end of this IRRBB journey, the reader will be equipped with all the necessary tools to build a proactive and compliant framework within a financial institution.

  • Gain an updated understanding of the evolving regulatory landscape for IRRBB
  • Learn to apply maturity gap analysis, sensitivity analysis, and the hedging strategy in banking contexts * Understand how customer behavior impacts interest rate risk and how to manage the consequences
  • Examine case studies illustrating key IRRBB exposures and their implications

Written by London market risk expert Beata Lubinska, Interest Rate Risk in the Banking Book is the authoritative resource on this evolving topic.

About Beata Lubinska

BEATA LUBINSKA, PhD, is a financial engineer with over 15 years of practical experience gained in international financial institutions such as GE Capital, Deloitte and Standard Chartered Bank based both in Milan and London. She is a Treasurer at Allica Bank focused on proactive management of financial risks and Balance Sheet Management, and a member of the BTRM Faculty founded by Professor Moorad Choudhry in London. She is the author of Asset Liability Management Optimisation: A Practitioner's Guide to Balance Sheet Management and Remodelling, also published by Wiley. Beata holds a PhD from Wroclaw University of Economics in Poland.

Table of Contents



Chapter 1. What is IRRBB and why it is important?

Subcategories of Interest Rate Risk

Regulatory overview for IRRBB - what has changed?

ECB 2017 IRRBB stress test

Interest rate shocks

Chapter 2. How to identify and measure Interest Rate Risk in the Banking Book?

Identification of IRRBB - case studies

Dual nature of IRRBB

Exposure to short-term interest rate risk - Maturity Gap analysis

Maturity gap analysis from the economic value perspective

Time bucket sensitivity analysis - PV01

Duration gap analysis

IRRBB metrics

Credit Spread Risk in the Banking Book (CSRBB)

Chapter 3. How to manage IRRBB?

Hedging Instruments for IRRBB

Why consider interest rate swap?

Natural hedging and hedging through derivatives.

Hedging strategies

Chapter 4. Behavioralisation of items without deterministic maturity and their impact on IRRBB

Significance and impact of the behavioural issues in the Banking Book

The reason for modelling CASA under IRRBB

The impact of early redemption of fixed rate assets on IRRBB

Approaches for the modelling of NMDs

Approaches for the modelling of statistical prepayment on the asset side

Model risk

Chapter 5. Interest Rate Risk and Asset Liability Management

Management of IRRBB under strategic ALM - proactive management of IRRBB

Setting up the target profile and integrated management of liquidity and interest rate risk through the application of numerical optimisation technique.

Setting up the funding strategy for a bank taking into consideration the hedging requirements.

IRRBB and Funds Transfer Pricing

Comprehensive and feasible IRRBB strategy

Management of the intragroup interest rate risk

Chapter 6. IRRBB stress test, reverse stress test and ICAAP

IRRBB stress testing

ICAAP - assessment of the internal capital to cover IRRBB

Chapter 7. IRRBB governance and framework

Risk Appetite Statement (RAS)

Appendix 1. Illustrative example of IRRBB policy.

Appendix 2. Illustrative example of IRRBB model manual.


Additional information

Interest Rate Risk in the Banking Book: A Best Practice Guide to Management and Hedging by Beata Lubinska
John Wiley & Sons Inc
Book picture is for illustrative purposes only, actual binding, cover or edition may vary.
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