Financial Products & Associated Risk Management

Interest Rate Risk Management


This eCourse consists of three modules on interest rate risk management. Module 1 introduces the concept of interest rate risk and how banks manage it. Note that the focus of the module is primarily on interest rate risk in the banking book – interest rate risk for the trading book falls within the scope of market risk.

Module 2 looks at the various approaches that banks take to interest rate risk management.

Module 3 looks at the various measures of interest rate risk that banks used and the issues and challenges they face in that regard.


On completion of this course, you will be able to:
- Define interest rate risk and identify the different types of reference rate used by banks
- Identify the potential impact of interest rate risk on a bank and the need to manage this risk
- Recognize how banks approach the management of interest rate risk and the expectations of regulators in relation to this
- Recognize the role of funds transfer pricing (FTP) in the management of interest rate risk
- Identify the importance of limit setting and monitoring in ensuring that interest rate risk remains within appetite
- Recognize how a matching strategy can be used to reduce interest rate risk and the difficulties in adopting such a strategy in practice
- Identify the different types of derivative that can be used to mitigate interest rate risk
- Recognize some of the difficulties associated with managing interest rate risk, especially in a low interest rate environment
- Identify the key considerations and challenges when measuring interest rate risk
- Distinguish between the use of earnings-based measures, such as gap analysis, and economic value measures, such as economic value of equity (EVE) and economic value at risk (EVaR), to assess interest rate risk


Module 1: Interest Rate Risk - An Introduction
Topic 1: Overview of Interest Rate Risk
Topic 2: Risk Management Framework for Interest Rate Risk

Module 2: Interest Rate Risk - Management
Topic 1: Funds Transfer Pricing (FTP)
Topic 2: Limit Setting
Topic 3: Matching & Mismatching Strategies
Topic 4: Hedging
Topic 5: Considerations When Managing Interest Rate Risk

Module 3: Interest Rate Risk – Measurement
Topic 1: Overview of Interest Rate Risk Measurement
Topic 2: Earnings-Based Measures
Topic 3: Economic Value Measures


Relevant Subject
SFC:2.50, PWMA:2.50
All Member: HK$800
Non-Member: HK$1200
Staff of Corporate Member: HK$800