After risk management and interest risk management in particular was primarily relevant for
banks in the past it is a crucial competition factor for all enterprises today. With
increasing volatile financial markets and global competition CFOs are focusing more and more on
an efficient measurement and management of interest rate risk. In this context this book aims
to point out the risks of an adverse change in interest rates for a corporate portfolio of
interest-bearing positions and show possibilities to measure and manage these risks. First the
scene for interest risk management in a corporate treasury of a service enterprise is set by
providing essential knowledge about financial risk management and giving an insight into the
characteristics of a service enterprise as well as the responsibilities of a corporate treasury
and the factors that influence the treasury risk management approach. This is followed by a
process-oriented instruction of how to quantify interest rate risk and how to manage it.
Besides the risk measures duration and convexity two different approaches to value at risk
the historical simulation and the variance-covariance-approach will be examined. For the
management of the interest rate risk an overview of possible hedging instruments to reduce
interest risk exposure will be given and their different strategies examined. All approaches
will be measured against their practical feasibility and for both the quantification and the
management of interest rate risk implications for the implementation in a service enterprise
will be provided.
