Interest Rate Risk of German Financial Institutions: The Impact of Level, Slope, and Curvature of the Term Structure

Czaja MG, Scholz H, Wilkens M (2009)

Publication Language: English

Publication Type: Journal article

Publication year: 2009

Journal

Review of Quantitative Finance and Accounting Western Academic Publishers

Publisher: Western Academic Publishers

Book Volume: 33

Pages Range: 1 – 26

URI: http://ideas.repec.org/a/kap/rqfnac/v33y2009i1p1-26.html

DOI: 10.1007/s11156-008-0104-9

Abstract

We investigate here the sensitivity of the equity values of a large sample of German financial institutions to movements in the term structure of interest rates. While similar approaches rely on a single interest rate factor only, we quantify the exposure to changes in level, slope, and curvature, which are the driving factors of term structure changes. Our main findings are: (i) banks and insurances are exposed to level and curvature changes but only marginally to slope movements; (ii) the interest rate risk exposure depends on the banking sector investigated; (iii) level and curvature changes are priced in the cross-section of stock returns. © 2009 Springer Science+Business Media, LLC.

Authors with CRIS profile

Hendrik Scholz Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken

Involved external institutions

Universität Augsburg DE Germany (DE)

How to cite

APA:

Czaja, M.-G., Scholz, H., & Wilkens, M. (2009). Interest Rate Risk of German Financial Institutions: The Impact of Level, Slope, and Curvature of the Term Structure. Review of Quantitative Finance and Accounting, 33, 1 – 26. https://doi.org/10.1007/s11156-008-0104-9

MLA:

Czaja, Marc-Gregor, Hendrik Scholz, and Marco Wilkens. "Interest Rate Risk of German Financial Institutions: The Impact of Level, Slope, and Curvature of the Term Structure." Review of Quantitative Finance and Accounting 33 (2009): 1 – 26.

BibTeX: Download