Interest Rates, Exchange Rates and World Monetary Policy

A careful basic theoretical and econometric analysis of the factors determining the real exchange rates of Canada, the U.K., Japan, France and Germany with respect to the United States is conducted. The resulting conclusion is that real exchange rates are almost entirely determined by real factors relating to growth and technology such as oil and commodity prices, international allocations of world investment across countries, and underlying terms of trade changes. Unanticipated money supply shocks, calculated in five alternative ways have virtually no effects. A Blanchard-Quah VAR analysis also indicates that the effects of real shocks predominate over monetary shocks by a wide margin. The implications of these facts for the conduct of monetary policy in countries outside the U.S. are then explored leading to the conclusion that all countries, to avoid exchange rate overshooting, have tended to automatically follow the same monetary policy as the United States.

Standard Variable Rate

This is the typical rate of interest that lenders use and it is generally the most expensive option for the borrower. The standard variable rate is the rate of interest decided by the lender which maybe loosely connected to the Bank of England base rate by a margin normally around 2%.
If you are on a standard variable rate then you may notice that some lenders like to involve any rate increases with effect straight away. At any rate the standard variable rate is not the cheapest option available (based on circumstance). An independent broker can help you take advantage of any cut-price offers from other lenders.

Interest Rate Analytics

Interest rates are central to the world of investing, business and economics. Interest Rate Analytics surveys over two centuries of thought on interest rates beginning with Adam Smith (1776). Credit-based interest rates incorporate the borrower’s debt service coverage and full loan payoff and are computed for non-financial firms worldwide in five sectors. Returns on debt with the same apparent interest rate are also examined. The appendices provide extensive supporting information, additional economic and financial commentary as well as a suggested blueprint for future economic expansion. A fixed rate is exactly as its called, the rate of interest is fixed over a certain period of time, generally between 1-5 years. Fixed rate mortgages are generally easier to manage since you’ll know how much is needed for the monthly repayments on your mortgage.

The fixed rate mortgage is ideal for people who maybe under financial stress and need to know where they stand from cheque to pay cheque. Fixed rate mortgages are also suitable if interest are set to rise in the early years of a mortgage. Be aware that mortgage providers are usually one step ahead to adjust fixed rates accordingly. A Fixed rate mortgage means you could end up stuck with paying more then others if the interest rates fall below the figure you’ve adjusted yours to.

Interest-Rate Options: Interest-Rate Risk Management

Capped rates give you a mix of advantages of the fixed rates and variable rates, again something is expected in return for this, the capped rate is likely to be higher than any fixed rate you can get. Like fixed rates the capped rate will make financial sense for those who are financially stricken.

If the lenders variable rate exceeds the capped rate then it is here you will benefit, but if the interest rate falls below the capped rate then you will paying the same as many others.
Capped rates will tie you into a mortgage for a certain period of time, usually between 1 and 5 years although recently there has been an introduction of capped mortgages for 25 year periods.

The titles in this series, all previously published by BPP Training, are now available in entirely updated and reformatted editions. Each offers an international perspective on a particular aspect of risk management.

Topics covered in this title include borrowers’ and lenders’ options, the settlement of borrowers’ and lenders’ options, interest-rate caps, floors and collars, option prices, using OTC options, and options on interest-rate futures.

Interest Rate Modeling. Term Structure Models

Variable interest rates. The majority of home loans in Australia have been taken at a variable interest rate. As the name implies, variable loan rates will fluctuate with the market and the official cash rate. Therefore, if the official cash rate rises, your loan interest rate rises and so do your repayments, and vice versa. Loans with variable interest rates tend to offer more flexibility in payment options.

The across-the-board increase in interest rates may prove to be a death blow to the finances of millions of Americans who are in debt and have lost their jobs. An argument could be made that, for American corporations to betray the American people in this way, when taxpayers are being called to bail out some of the largest and richest financial institutions in the world, is not just unhelpful, but unpatriotic.

Foundations and Vanilla Models

Introduction to Arbitrage Pricing Theory Finite Difference MethodsMonte Carlo MethodsFundamentals of Interest Rate ModellingFixed Income Instruments      Part II. Vanilla Models
Yield Curve Construction and Risk ManagementVanilla Models with Local VolatilityVanilla Models with Stochastic Volatility I Vanilla Models with Stochastic Volatility II  Volume II. Term Structure Models

Single-Rate Vanilla DerivativesMulti-Rate Vanilla DerivativesCallable Libor ExoticsBermudan Swapt

Interest Rate Swaps and Other Derivatives

The first swap was executed over thirty years ago. Since then, the interest rate swaps and other derivative markets have grown and diversified in phenomenal directions. Derivatives are used today by a myriad of institutional investors for the purposes of risk management, expressing a view on the market, and pursuing market opportunities that are otherwise unavailable using more traditional financial instruments. In this volume, Howard Corb explores the concepts behind interest rate swaps and the many derivatives that evolved from them. Corb’s book uniquely marries academic rigor and real-world trading experience in a compelling, readable style. While it is filled with sophisticated formulas and analysis, the volume is geared toward a wide range of readers searching for an in-depth understanding of these markets. It serves as both a textbook for students and a must-have reference book for practitioners. Corb helps readers develop an intuitive feel for these products.

The basic goal for most bond investors in any market environment is to construct a portfolio that satisfies certain characteristics of yield and liquidity, while having no more risk than is necessary. While there are many ways to evaluate the interest rate risk in any particular fixed income portfolio, the single most important metric that all investors must understand is duration. Although there are many different ways to measure duration, in its simplest form duration is a single number that measures time, in years, and represents the weighted-average time of receipt of all cash flows from a particular fixed income security.

A History of Interest Rates

A History of Interest Rates presents a very readable account of interest rate trends and lending practices over four millennia of economic history. Despite the paucity of data prior to the Industrial Revolution, authors Homer and Sylla provide a highly detailed analysis of money markets and borrowing practices in major economies. Underlying the analysis is their assertion that “the free market long-term rates of interest for any industrial nation, properly charted, provide a sort of fever chart of the economic and political health of that nation.” Given the enormous volatility of rates in the 20th century, this implies we’re living in age of political and economic excesses that are reflected in massive interest rate swings. Gain more insight into this assertion by ordering a copy of this book today.

Interest Rate Modeling. Foundations and Vanilla Models

It is safe to say that interest rates are going to be moving higher over the balance of 2010. When they start to move and the magnitude of the move is harder to gauge. The central bank of Australia has already begun to inch rates higher. The Bank of Canada, which currently has prime set at .25%, anticipates not moving rates until the end of June 2010. It is thought that the American Fed might hold the line in raising rates until the 3rd or 4th quarter of 2010.

The direction in which the rates will move is dependent upon three separate but primary factors. Interest rates are affected by the supply and demand of available cash. They are also affected by the monetary policies adopted by the central banks of each country. Lastly, the rates of interest are affected by inflation rates. Interest rates tend to act in global synchronization, although the pace of moves and magnitude of moves can vary widely between countries.
A long-term bond will have a higher duration than a short-term bond, and will therefore be more sensitive to changes in interest rates and have greater interest rate risk. The duration of a portfolio of bonds is simply the weighted-average duration of all its constituent holdings.


Interest Rate Models – Theory and Practice

The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into a new chapter. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach.Examples of calibrations to real market data are now considered. The fast-growing interest for hybrid products has led to a new chapter. A special focus here is devoted to the pricing of inflation.

The typical letter has informed the credit cardholder that his interest rate is going up in about 90 days and, for many, that’s around the middle of May, 2009. So those cardholders still may have time to formulate an escape plan.

For those accounts that do have a default rate, it is best described as a penalty rate. Higher than the rate that the customer has been paying, it is the new percentage to which the interest rate on an account “defaults” when the cardholder has violated the terms of his credit card agreement.

Interest Rate Swaps and Their Derivatives

An up-to-date look at the evolution of interest rate swaps and derivatives Interest Rate Swaps and Derivatives bridges the gap between the theory of these instruments and their actual use in day-to-day life. This comprehensive guide covers the main “rates” products, including swaps, options (cap/floors, swaptions), CMS products, and Bermudan callables. It also covers the main valuation techniques for the exotics/structured-notes area, which remains one of the most challenging parts of the market. Provides a balance of relevant theory and real-world trading instruments for rate swaps and swap derivatives Uses simple settings and illustrations to reveal key results Written by an experienced trader who has worked with swaps, options, and exotics With this book, author Amir Sadr shares his valuable insights with practitioners in the field of interest rate derivatives-from traders and marketers to those in operations.

Interest Rate Modelling in the Multi-Curve Framework

Interest rate modelling has undergone significant change in the last five years following the financial crisis. No longer is a single yield curve sufficient in representing real world markets. Instead, practitioners and academics are now using multi-curve frameworks, which more accurately represent current market conditions. A complete review of the models used in academic literature and by practitioners has taken place, and millions of dollars have been spent worldwide on revising basic concepts and redeveloping models and systems in the world’s leading banks, hedge funds and insurance companies.

Serving as a practical reference for academics and practitioners alike, this book details all the foundations of this new approach, focusing on recent developments (2007–13) and the impact of multi-curve models. It analyses the impact on the interaction between the curves, how market instruments liquidity and conventions force curves that are a lot more than simply a multiplication o