CIMA Official Learning System P3 — Performance Strategy （12）Interest Rate Management

L EARNING O UTCOMES
After completing this chapter you should be able to:
? identify and evaluate interest-rate risks facing an organisation;
? identify and evaluate appropriate methods for managing interest-rate risk;
? demonstrate how and when to convert fi xed-rate to fl oating-rate interest;
? evaluate the effects of alternative methods of interest-rate risk management such as
swaps, forward-rate agreements, futures, options and swaptions, and make appro-
priate recommendations.
1 2.1 Introduction
The main purpose of this chapter is to introduce interest-rate risk management. Interest-
rate risk has received increased attention as an important source of corporate risk in recent
times. Interest-rate movements may affect present and future cash fl ows of the company.
We begin by examining the various sources of interest-rate risks and their impact on the
company. We then examine how these risks can be managed using a range of interest-rate
management techniques including the use of interest-rate products such as forward-rate
agreements, interest-rate swaps, futures and options. The chapter concludes with a brief
summary.