Linear and Nonlinear Interest Rate Exposure of Spanish Firms

26 Pages Posted: 14 Apr 2006

See all articles by Cristobal Gonzalez

Cristobal Gonzalez

University of Valencia

Roman Ferrer

University of Valencia

Gloria M. Soto

University of Murcia - Faculty of Business and Economics

Date Written: March 2006

Abstract

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

Gonzalez, Cristobal and Ferrer, Roman and Soto, Gloria M., Linear and Nonlinear Interest Rate Exposure of Spanish Firms (March 2006). Available at SSRN: https://ssrn.com/abstract=888488 or http://dx.doi.org/10.2139/ssrn.888488

Cristobal Gonzalez (Contact Author)

University of Valencia ( email )

E-46022 Valencia, Valencia E-46022
Spain

Roman Ferrer

University of Valencia ( email )

E-46022 Valencia, Valencia E-46022
Spain

Gloria M. Soto

University of Murcia - Faculty of Business and Economics ( email )

Spain

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