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Below are some topics which i came across for which no numericals were present in icai study mat , I used AI to club all these , as i am running out of time can anyone plz go through this compilation for IRRM chapter and share your feed back or thoughts .

Theory-only topics — NO numerical in ICAI SM:

1. Gap Analysis / Earnings at Risk (EaR) — RSA, RSL, Gap, NII impact
2. Basis Risk — NII expansion/contraction due to differential rate changes
3. Interest Rate Futures (IRF) — Conversion Factor & Cheapest to Deliver (CTD)
4. Floor Option — formula given, example only in Cap, nothing for Floor
5. Interest Rate Collar — formula given, zero numerical
6. Basis Rate Swap — explained, no numerical
7. Amortising Swap — explained, no numerical
8. Swaptions — entire section, zero numerical

1. Gap Analysis & Earnings at Risk (EaR)

Question

ABC Bank has the following interest-sensitive positions for the next one year:

Particulars	₹ Crore
Rate Sensitive Assets (RSA)	850
Rate Sensitive Liabilities (RSL)	700

Expected interest rate increase = 1.20%

Required:

1. Compute GAP.
2. Compute Earnings at Risk (EaR).
3. State whether NII increases or decreases.

Solution

Step 1

Gap

= RSA − RSL

=850−700

= ₹150 crore (Positive Gap)

Step 2

EaR

= Gap × Change in Interest Rate

=150×1.2%

= ₹1.80 crore

Step 3

Since

RSA > RSL

the bank is Asset Sensitive.

Interest rates increase

↓

Asset income rises more than liability cost

↓

NII increases.

Answer

Positive Gap = ₹150 crore

EaR = ₹1.80 crore increase in earnings.

2. Basis Risk

Question

A bank has

Assets linked to MCLR

Liabilities linked to Repo Rate

Initially

MCLR = 8%

Repo = 6%

During the year

MCLR rises to 8.50%

Repo rises to 7%

Interest earning assets = ₹900 crore

Interest bearing liabilities = ₹900 crore

Compute increase in annual NII due solely to basis movement.

Solution

Increase in asset yield

=0.50%

Increase in liability cost

=1%

Difference

=−0.50%

Loss in NII

=900×0.50%

= ₹4.50 crore

Since liability rates increased faster,

Basis moved against the bank.

3. Interest Rate Futures (Conversion Factor)

Question

A futures contract settles at ₹108.50.

Conversion factor of deliverable bond = 0.9450

Find actual invoice (delivery) price.

Solution

Delivery Price

= Futures Price × Conversion Factor

=108.50×0.945

= ₹102.53

Answer

Invoice Price = ₹102.53

4. Cheapest to Deliver (CTD)

Question

Futures settlement price = ₹111

Three deliverable bonds are available.

Bond	Spot Price	Conversion Factor
A	108	0.95
B	103	0.92
C	106	0.98

Identify CTD bond.

Solution

Adjusted Futures Price

Bond A

111×0.95

=105.45

Profit

=105.45−108

=−2.55

Bond B

111×0.92

=102.12

Profit

=102.12−103

=−0.88

Bond C

111×0.98

=108.78

Profit

=108.78−106

=+2.78

Maximum profit

=Bond C

Hence

CTD = Bond C

5. Floor Option

Question

A company purchases an Interest Rate Floor.

Notional Principal = ₹80 crore

Floor Rate = 6%

Actual Market Rate = 5.10%

Reset Period = 180 days

360-day convention.

Compute floor payoff.

Solution

Formula

Payoff

=N×max(0,rf−r)×dt/360

Difference

=6−5.10

=0.90%

=0.009

Payoff

=80×0.009×180/360

=80×0.0045

= ₹0.36 crore

= ₹36 lakh

6. Interest Rate Collar

Question

XYZ Ltd enters into a collar.

Notional Principal = ₹100 crore

Cap Rate = 8%

Floor Rate = 6%

Actual Rate = 5%

Period = 180 days

Find settlement.

Solution

Cap payoff

=max(0,5−8)

=0

Floor sold

=max(0,6−5)

=1%

Since floor is sold,

payment is

100×1%×180/360

=100×0.01×0.5

= ₹0.50 crore

Net Collar Payoff

=0−0.50

= ₹50 lakh payable

7. Basis Rate Swap

Question

Company enters into Basis Swap.

Notional Principal = ₹150 crore

Pays

3-month MIBOR

Receives

6-month MIBOR

Current rates

3M MIBOR = 6.40%

6M MIBOR = 6.85%

Settlement period = 180 days

Compute net receipt.

Solution

Interest received

150×6.85%×180/360

=₹5.1375 crore

Interest paid

150×6.40%×180/360

=₹4.80 crore

Net Receipt

=5.1375−4.80

= ₹0.3375 crore

= ₹33.75 lakh

8. Amortising Swap

Question

ABC Ltd has redeemable debentures.

The notional principal under swap reduces annually.

Year	Notional
1	₹200 crore
2	₹150 crore
3	₹100 crore

Fixed rate = 7%

Floating Rate = 6%

Compute annual net payment by fixed-rate payer.

Solution

Year 1

Fixed

200×7%

=14

Floating

200×6%

=12

Net

=₹2 crore payable

Year 2

Fixed

150×7%

=10.5

Floating

150×6%

=9

Net

=₹1.5 crore payable

Year 3

Fixed

100×7%

=7

Floating

100×6%

=6

Net

=₹1 crore payable

Total net paid

=2+1.5+1

= ₹4.5 crore

Bonus: Swaption Numerical

Question

A company buys a payer swaption on a ₹250 crore notional principal, giving it the right to enter a 5-year fixed-for-floating swap at a fixed rate of 7%. At expiry, the market fixed swap rate is 8%.

Should the company exercise the swaption? Explain quantitatively.

Solution

A payer swaption is valuable when market fixed rates exceed the strike rate because the holder can pay the lower contractual fixed rate (7%) instead of the market rate (8%).

Interest saving in the first year:

= ₹250 crore × (8% − 7%)

= ₹2.50 crore per year (before considering discounting and the remaining swap term).

Since the market rate is higher than the strike rate, the company should exercise the payer swaption. The option is in the money.

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Do share your opinions who have gone through this surgery

Also my mom has oestroarthritis as well (not advanced stage though)