Page 12 - PowerPoint Presentation
P. 12
THE TREASURY FUNCTION
Interest rate risk
• The risk of financial loss resulting from changes
in interest rates.
• Borrowers, with floating rate debt, will be exposed to interest
rate risk when interest rates increase.
• Investors, where interest is earned at a floating rate, will be
exposed to interest rate risk if interest rates decrease.
Hedging of interest rate risk:
• The following hedging policies and techniques
can be used by a company to reduce its
exposure to interest rate risk:
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