Interest rate risk of German financial institutions: the impact of level, slope, and curvature of the term structure

摘要

We investigate here the sensitivity of the equity values of a large sample of German financial institutions to movements in the term structure of interest rates. While similar approaches rely on a single interest rate factor only, we quantify the exposure to changes in level, slope, and curvature, which are the driving factors of term structure changes. Our main findings are: (ⅰ) banks and insurances are exposed to level and curvature changes but only marginally to slope movements; (ⅱ) the interest rate risk exposure depends on the banking sector investigated; (ⅲ) level and curvature changes are priced in the cross-section of stock returns.