Earnings at Risk (EaR)

Earnings at risk (EaR) is a risk measurement of the amount by which net income may adversely change due to interest rates fluctuations. In other words, Earnings at risk (EAR) helps organizations to evaluate how changes in interest rates may affect the organization’s earnings.

The difference between Value at Risk (VaR) and Earnings at risk (EAR) is that EaR measure only changes in the cash inflows from earnings whereas VaR measures total loss on a certain portfolio of financial instruments.

 

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