Commercial banks at risk of losses due to interest rate exposure.
Interest rates can greatly impact how well commercial banks do. This article looks at how banks manage this risk. They use two methods to measure risk: interest rate gap and duration gap. Banks can manage risk by adjusting their assets and liabilities or using financial tools like futures and swaps. The study found that a Swedish bank, Ikanobanken, made mistakes in managing their interest rate risk in 2003, leading to losses.