INTEREST RATE RISK IN THE BANKING BOOK: EMBEDDED OPTIONS IN RESIDENTIAL MORTGAGES
Interest rate risk is associated with the fluctuations in the interest rates. Interest rate risk therefore can be defined as the change in the portfolio value that a bank obtains as a result of the unexpected changes in the interest rates. The interest rate risk can also be termed as one of the ways that an individual or the bank can make profits and the value of the shareholder can gain therefore banks accept interest rate risk as a normal part of their banking business. However, for banks taking an excessive interest rate risk could threaten bank’s earnings and capital base. This is because the fluctuations in the rate of interest normally alter with the earnings of the bank. This means that it changes its net interest income, the level of other incomes that are associated with the interest rate and operating expenses. This will in overall alters the value of the assets as well as liabilities. Often change when interest rates changes. Furthermore interest rate risk affects a bank’ earnings directly as, there may be changes on active and passive interest rates plus changes on market values of assets and liabilities as well as indirectly, due to changes on business volumes. Thus, to effectively manage the risks is very much essential in order to ensure that the earnings and the value of the bank is maintained in its expected position or increases as required.
Therefore, banks typically split interest rate risk into two components: traded interest rate risk and non-traded interest rate risk. The non-traded interest rate risk is often referred to as interest rate risk on the balance sheet or in the banking book and therefore includes all commercial banking activities in the banking sector. Both refer to the potential impact of adverse movements in interest rates but they follow different accounting rules. The underlying principle for separating these portfolios is that while the banking portfolio follows traditional accounting rules of accrued interest income and accrued interest costs, trading on the other hand relies on market values (market-to-market) of transactions….
Article Review #1:
Hegemony indirectly implies control in the political context before it has been associated in media studies. The media, especially in democratic countries, is regarded as the protector of freedom and the values of democracy. Therefore, the public significantly trusting the media unquestionably believe media news as true. On the basis of Gramsci’s media theory from which media hegemony was developed, public consent is the core in maintaining power. The media play a central role in influencing the beliefs and perception of the greater public from local to national and international realm. The theory suggests that while the public have great faith in the media, they consent it as true all the news that the media publish. In this context, the content of the article authored by Phillip Coorey published at Brisbane Times was structured to operate hegemony in which the article proposed to favor the interest of Julian Assange in the recent WikiLeaks issue….
PATTERNS WITHIN SYSTEM OF LINEAR EQUATION
A system of linear equation is basically dealt with in the algebra unit. It is a collection of the linear equations involving variables of the same set in the in the equations that are involved. For example a 2×2 system of linear equations includes:
x + 2y=10
3x + 4y=15
Here in both the cases the equations only involve two variables that is x and y and no other variable is included.
In the example of a 33 system of linear equations it mostly includes the variables x, y and z for example;
2x + y-z =11
x- 2y + 2z =-2
Where only the three variables are involved
There are also various properties of the patterns of the linear systems. We will start with the consistency property. If the systems of the equations have common solutions, then they are said to be consistent. This therefore means that graphically the lines should be straight lines. The independence property is also termed as the linear independence. The systems of equations are usually independent since to start with, they are derived algebraically from others. For example the system 3x+4y =9 and 6x +8y =18.
There are different ways of solving the systems of linear equations that includes;
- The elimination of variables
- The substitution of variables technique
- The row reduction method
- The crammers’ rule…
Example Essay on Ragged Dick:
This “Ragged Dick” is myth that people is rewarded if he does his best sincerely. Hero Dick is the poor boy who makes his living by shoeshine. To money, he is very sincere, and his sincerity is trusted by rich man and he achieves to go into rich circle. However, such a myth is an empty dream that is not possible rarely very much. In Japan, the American society is considered to be society with the dream that a chance is given to everybody. However, it is a lie. Isn’t it extremely difficult for the person belonging to a social of lower rank ba like this myth to achieve a success? For succeeding, the man’s circumstance is important first.
Does the American dream exist in everybody or not? An answer is NO. The United States is connection society in a academic career-oriented society more than Japan. In the society in that mobs has gathered out of the world like the United Stase, “personal character” and “the hidden ability” should not be understood by any means in the interview for several minutes. An immaterial thing is made to the object of evaluation in the case everybody is sharing definite culture. In the society that everybody is not sharing the common cultural base like the United State, the degree depending on a material thing, for example what degree in what grades in what university, and influential person’s recommendation, will become large. People who is not a good university graduate and there is also no good connection, even if he has ability, a chance does not turn. Such conversation exists between Dick and the man in a book “Don’t you ever steal, then?” “No, I wouldn’t.” “Lots of boys does it, but I wouldn’t.”(36). I agree he is an honest. But, the present time does the boy of a shoeshine win a great success cause living honestly….