Banker In Interest Rate Risk Management

How I Got The Job

My Education: BA in Human Resources, Miami University

My Prior Experience: Banking for 20 years

My Job Profile

My Company: I work for a Bank in the interest rate risk management group, Bank Capital Markets

Job/Career Overview: I talk and meet with people from all over the United States about interest rates. Banks prefer to lend to customers on a floating rate basis instead of a fixed rate. I have the ability to fix the rate for the customer using an interest rate derivative. An interest rate derivative gives the client the right to pay or receive a notional amount of money at a given interest rate. The interest rate derivatives market is the largest derivative market in the world. I work on a trade floor with people who may trade bonds, stocks, foreign exchanges, and debt.

An example of a deal I may do: The bank lends one of our customers $50,000,000 to buy equipment to make auto parts. The bank will charge an interest rate of LIBOR (.25% floating rate) + 2.50% (spread the bank earns) = 2.75%. Sounds like a good rate but if the economy starts to improve the rate will rise back to its historical average. The client may not want to have the interest rate risk and choose to fix a portion of the floating rate to a fixed rate. Currently 4.75% for 5 years. It cost more to fix the rate now but if the floating rate increases the client may save money over time.