Question: How do banks manage interest rate risk? Banks perform basic gap analysis, which compares a bank's interest rate risk - sensitive assets and liabilities. Banks
How do banks manage interest rate risk?
Banks perform basic gap analysis, which compares a bank's interest rate risksensitive assets and liabilities.
Banks perform duration analysis, which accounts for the fact that bank assets and liabilities have different maturities.
Banks hedge against interest rate risk by trading derivatives, Fike swaps and futures, and engaging in other offbalancesheet activities.
All of the above.
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