Duration Gap Analysis and Interest Rate Risk Management

Fluctuations in interest rates can dramatically impact a financial institution's balance sheet. Understanding how to measure and mitigate this risk is a critical skill for finance professionals, analysts, and aspiring risk managers. This text-based course guides you through the core principles of Asset Liability Management (ALM), showing you how to assess price volatility, calculate duration gaps, and implement strategies to protect the Economic Value of Equity (EVE) against adverse rate movements. What you'll learn: - Understand the fundamentals of interest rate risk, bond pricing, and yield curves. - Measure price volatility using Macaulay duration, modified duration, and convexity. - Calculate the duration gap of a balance sheet to assess interest rate sensitivity. - Evaluate the impact of rate shifts on the Economic Value of Equity (EVE). - Apply hedging and balance sheet restructuring strategies to mitigate duration gap risk. - Practice modern stress testing and scenario analysis techniques aligned with current risk-management standards. You will start with essential financial terminology and foundational interest rate concepts before moving into practical mathematical frameworks. The course then walks you through balance sheet scenarios, demonstrating how to analyze risks and formulate strategic decisions entirely through clear, written explanations and step-by-step calculations. This course is designed for beginners in finance, banking professionals, and risk management students. No advanced prior experience in asset-liability management is required to begin. Read through our comprehensive guides and master the mechanics of duration gap risk management today.