Important Points for IC 99 - Asset Management Exam
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Macaulay duration measures the "weighted average time-to-maturity of the bonds cash flows." It is a measure of bonds sensitivity to interest rate changes.
Stress testing on a periodical basis, is carried out to establish resilience levels and simulate effectiveness of remedial measures in the event of a financial crisis. Stress testing meant for Liquidity Risk Management solution paves way for protecting the balance sheet under various scenarios and conditions.
Two main approaches to security analysis are fundamental analysis and technical analysis.
Interest rate sensitivity is a measure of how much the price of a fixed-income asset will fluctuate as a result of changes in the interest rate environment. Securities that are more sensitive will have greater price fluctuations than those with less sensitivity.
MCLR is a benchmark rate which reflects the cost of funds for a particular tenure. For instance, if a bank cuts its one-year deposit rate, its one-year MCLR will see a decline.
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