CHAPTER 20
Value at Risk in the Trading Book: The Aggregation of Risks
So far the impact of a change in interest rate on the earnings or economic value of the bank has been considered. The reality is much more complex, however, because even in a one-currency bank, there will be several interest rates along the yield curve. A multinational bank will face movements of interest rates in different currencies, as well as foreign exchange risk. In short, a bank faces a multitude of sources of risk. Each source of risk, or specific earnings at risk, needs to be identified:
• Risk related to a change in the short-term rate in U.S. dollars
...
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