X hits on this document

Powerpoint document

MANAGING INTEREST RATE RISK: DURATION GAP AND MARKET VALUE OF EQUITY - page 16 / 39

128 views

0 shares

0 downloads

0 comments

16 / 39

Focus on the market value of equity (MVE)

We know that: MVE = MVA – MVL

With

Ai = – DAi [ y / (1+y) ] Ai and

Lj = – DLj [ y / (1+y) ] Lj

Hence:

MVE = –[DA – (MVL / MVA) DL] [y / (1+y)] MVA

If we define a bank’s duration gap: (DGAP) = DA – (MVL / MVA) DL, then

MVE = – DGAP [ y / (1+y) ] MVA

Document info
Document views128
Page views128
Page last viewedFri Jan 20 22:53:10 UTC 2017
Pages39
Paragraphs367
Words2250

Comments