Interest rate risk can be seen as one of the most important forms of risk, that banks face in
their role as financial intermediaries. Innovation in financial theory, increased computerization,
and changes in foreign exchange markets, credit markets and capital markets have contributed to
the need to supplement traditional methods to measure and manage interest rate risk with more
recent methods. Interest rate risk can thus be controlled optimally by using of derivatives along
with traditional methods, in order for banks to experience less interest rate uncertainty, and to increase
their lending activities, which can result in greater returns and higher overall profitability.