New study reveals how banks can effectively manage interest rate risk
The article discusses how banks can manage interest rate risk by using swaps like Interest Rate Swaps (IRSs). These swaps help banks exchange cash flows to hedge against interest rate changes. Caps and floors are also used for hedging. By using these strategies, banks can better manage their exposure to interest rate risk in their banking books. IRSs are commonly used for this purpose due to their flexibility and effectiveness in balancing the bank's interest rate exposure.