Linear and Nonlinear Interest Rate Exposure of Spanish Firms
26 Pages Posted: 14 Apr 2006
Date Written: March 2006
This paper carries out a comprehensive analysis of the interest rate risk borne by the Spanish firms on a sector basis. The traditional linear interest rate exposure model has been extended to allow for the possibility of a nonlinear exposure component as well as the presence of asymmetric behaviour in the exposure pattern. The obtained results show a significant interest rate exposure for some sectors, especially with regard to changes in the long-term interest rates. Moreover, it is documented that the linear exposure profile prevails over the asymmetric and nonlinear exposure patterns. In particular, the Construction sector is the sector that shows the highest incidence of interest rate risk in the Spanish case.
Keywords: interest rate exposure, stock, firm, sector, risk management
JEL Classification: E40, G30
Suggested Citation: Suggested Citation