If he were that kind of hands-on manager, this mess might not have happened in the first place.
The real risk-free rate is 4%. 1. The real risk-free rate is 4%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.
Components of interest rate risk. Interest rate risk (IRR) is defined as the change in a bankâs portfolio value due to interest rate fluctuations. Taking on IRR is a key part of what banks do; but taking on excessive IRR could threaten a bankâs earnings and its capital base, raising concerns for bank supervisors.