Roxana Calistru


Roxana Calistru, Cecilia Pop

The purpose of this paper is to identify and analyze the techniques and methods to estimate the interest rate risk attending a bonds loan, in order to be able to offer a useful and efficient tool for underlying and improve the investment financing decisions. Methodologically, the research has recourse to adequate methods of assessment of financial flows: the binomial method, the decision tree, the Monte Carlo simulation and the specific parameters for updating the cash flow, as well as the statistical measurement of outputís volatility through the chronological series method. The research relieves placing the interest rate riskís estimation in decision process of the companies; systematization and clarification of ways to estimate the interest rate risk in relation with the strategy of the company and the investment programsí financing source; the conveyance and estimation of bondís price volatility as a fundamental of the interest rate risk; quantification of sensitivity of held position to interest rate change. The success in interest rate risk management canít be achieved unless a good quantification is made, allowing afterwards diminishing the risk exposure to admissible level.

Key words: interest rate, risk, bond, valuation, duration