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We've discussed that banks would prefer to lend long and borrow short referencing the maturity of assets and liabilities respectively. If this is the case,
We've discussed that banks would prefer to "lend long" and "borrow short" referencing the maturity of assets and liabilities respectively. If this is the case, why wouldn't a bank only make 30+ year loans and borrow money overnight to finance the long-term loans? What are the risks this bank would be taking? (Hint: consider implications related to NIM, duration, and credit risk)
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