THEORETICAL AND METHODOLOGICAL BASIS OF INTEREST RATE RISK MANAGEMENT IN A BANK

Abstract

The article explores the theoretical and methodological foundations of interest rate risk management in a bank through a comprehensive understanding of its economic essence, causes of occurrence, transmission channels, and mechanisms of influence on the financial performance of banking institutions in Ukraine. Particular attention is paid to the identification of internal and external factors that generate interest rate risk under conditions of macroeconomic instability, monetary tightening, and structural imbalances in the financial market. The relationship between interest rate risk and other types of banking risks, including credit, liquidity, market, operational, and regulatory risks, is analyzed in order to determine how their interaction affects the stability of net interest income, capital adequacy, and overall financial resilience of banks. The study examines direct and indirect forms of interest rate risk, basis risk, repricing risk, yield curve risk, and option risk arising from embedded options in financial instruments. Methodological approaches to risk measurement are systematized, including GAP analysis, duration analysis, sensitivity analysis of assets and liabilities to changes in market interest rates, and stress testing techniques. Special emphasis is placed on asset and liability management (ALM) models as a key element of the integrated risk management framework. It has been established that inaccuracies in ALM modeling, incorrect calculation of GAP indicators, insufficient data quality, and weaknesses in the organizational structure of risk management significantly reduce the effectiveness of interest rate risk control and may lead to deterioration in profitability and capital positions. The empirical basis of the research includes financial sector statistics and regulatory documents of the National Bank of Ukraine, which are used to assess, monitor, and interpret interest rate risk indicators. The results of the study have practical significance for strengthening the stability of bank income, improving internal risk management procedures, enhancing regulatory compliance, and optimizing strategic decision-making in conditions of economic and financial uncertainty.