Hedging with Off-Market Swaps
While this minor disparity in the effective fixed rate, ex post, relative to its ex ante anticipated fixed rate would likely justify the ass
Hedging Loan Commitments
With this orientation, the bank would typically seek to hedge all or a portion of the uncertain funding costs that would be expected to aris
Saving Money When Banks Offer ‘Chooser Options’
Publication: AFP Exchange PDF Version Many companies with variable-rate funding look to derivatives to transform their variable...
The Two Faces of Market Risk
It should also be clear that, as longer duration assets have greater interest rate sensitivity than shorter duration liabilities, higher int
Synthetic Debt, Repos, and Dollar Rolls
Mortgage Dollar Roll Transactions. One active category of synthetic debt is called a mortgage dollar roll transaction. The same design as de
Hedging Bank Portfolios: Framing the Issue
To illustrate, consider a simplified example where a bank relies on monthly deposits as its primary funding source in connection with its ho