Discuss the role and impact of embedded options

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Reference no: EM13884972

ALCO members are considering the following EVE sensitivity estimates. The figures refer to the percentage change in economic value of equity compared with the base rate forecast scenario. What does the information say about the bank's overall interest rate risk? Discuss the role and impact of embedded options.

-3 - 2% - 1% + 1% + 2% + 3%

% change in EVE - 38% - 47% - 19% + 5% + 14% + 18%

Reference no: EM13884972

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