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RBA Glossary definition for interest rate

interest rate – The term used to describe the cost of borrowing money or the return to the owner of the funds which are invested or lent out. It is usually expressed as a percent per annum of the amount of money borrowed, lent or invested.

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Interest Rate Swaps

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
The portfolios on which our results are based include both interest rate swaps and forward rate agreements (FRA). ... The first interest payment is determined by a fixed interest rate agreed between the two parties at the inception of the FRA.
https://www.rba.gov.au/publications/rdp/1994/9409/int-rat-swa.html

Appendix 1

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
The interest rate model above determines the yield curve for zero coupon interest rates. ... To revalue an interest rate swap it is necessary to derive a swap rate from the zero coupon rates.
https://www.rba.gov.au/publications/rdp/1994/9409/appendix-1.html

Capital Standards

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
For example:. current rates;. interest rates rise by a given amount; and. ... For example, a portfolio of foreign exchange swaps is exposed to movements in, at least, three underlying markets, namely, interest rates in each currency and the exchange rate.
https://www.rba.gov.au/publications/rdp/1994/9409/capital-standards.html

Credit Exposure

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
From the interest rate model, a confidence interval (say 95 per cent) is taken to yield the “worst case” upward and downward movements in interest rates. ... various interest rate scenarios to obtain a time path for worst case losses.
https://www.rba.gov.au/publications/rdp/1994/9409/credit-exposure.html

Results

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
Moreover, while the interest rate cycle is fairly smooth, other asset prices such as foreign exchange rates tend not to follow such smooth cycles and so this approach may not be ... This was, in all likelihood, close to the trough in the Australian
https://www.rba.gov.au/publications/rdp/1994/9409/result.html

Default Risk and Derivatives: An Empirical Analysis of Bilateral Netting

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
Research Discussion Paper – RDP 9409 Default Risk and Derivatives: An Empirical Analysis of Bilateral Netting. Marianne Gizycki and Brian Gray. December 1994. 105. KB. Related Information. The materials on this webpage are subject to copyright and
https://www.rba.gov.au/publications/rdp/1994/9409/

Conclusion

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
The conclusions of the analysis are, nonetheless, tentative since the work covers only portfolios comprising simple interest rate swaps and forward rate agreements. ... The add-on factors for exchange rate contracts are considerably higher than those for
https://www.rba.gov.au/publications/rdp/1994/9409/conclusion.html

Introduction

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
The next section describes interest rate swaps – the financial product on which our empirical results are based. ... Section 3 sets out a method for determining credit exposure employing interest rate simulations.
https://www.rba.gov.au/publications/rdp/1994/9409/introduction.html

The Effects of Netting on Credit Exposure

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
Table 3 contains the correlation coefficients between monthly changes in Australian interest rate swap rates and government bonds of varying maturities between February 1990 and September 1993. ... Consider a bank that has contracted, as the result of an
https://www.rba.gov.au/publications/rdp/1994/9409/effects-netting.html

References

1 Dec 1994 RDP 9409
Marianne Gizycki and Brian Gray
Economic Review. , March, pp. 3–18. Longstaff, F. and E. Schwartz (1992), ‘Interest Rate Volatility and the Term Structure: A Two-Factor General Equilibrium Model’,. ... 1993), ‘Interest Rate Structure and the Credit Risk of Swaps’,. New
https://www.rba.gov.au/publications/rdp/1994/9409/references.html