Journal Article
Measuring Interest Rate Risk in the Very Long Term
Abstract: Insurance companies write policies to cover potential risks far into the future. Because the life of these contracts can extend well beyond the 30-year maturities for the longest U.S. Treasuries, it?s difficult to measure the interest rate risk involved. A new study describes how the long-term interest rates required to evaluate such long-lived liabilities can be extrapolated from shorter-maturity bond yields using a standard yield curve model. These extrapolations are a useful tool since they have very small errors relative to the yield curve variation typically considered for risk management.
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2017
Order Number: 12