Advanced frameworks for managing interest rate risk in banking investment portfolios

Posted: Aug 12, 2019

• Prof. Victor Mehta
• Prof. William Johansson

Abstract

The management of interest rate risk represents one of the most critical challenges facing modern banking institutions, particularly in the context of increasingly complex investment portfolios and volatile global financial markets. Traditional approaches to interest rate risk management, primarily centered around duration and convexity measures, have demonstrated significant limitations in capturing the multifaceted nature of interest rate movements and their complex interactions with diverse portfolio components. This research introduces a groundbreaking quantum-inspired computational framework that fundamentally reimagines how banking institutions can approach interest rate risk management. The novelty of our approach lies in its integration of quantum computing principles with advanced machine learning techniques, creating a multi-dimensional risk assessment system that transcends the limitations of classical financial models.