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Question 126/145
A risk analyst is considering how to reduce the bank's exposure to rising interest rates. Which of the following strategies will help her achieve this objective?
I. Reducing the average repricing time of its loans
II. Increasing the average repricing time of its deposits
III. Entering into interest rate swaps
IV. Improving earnings capacity and increasing intermediated funds
I. Reducing the average repricing time of its loans
II. Increasing the average repricing time of its deposits
III. Entering into interest rate swaps
IV. Improving earnings capacity and increasing intermediated funds
Correct Answer: B
Entering into interest rate swaps can help a risk analyst reduce the bank's exposure to rising interest rates.
Interest rate swaps can be used to convert variable-rate liabilities into fixed-rate liabilities, thereby reducing the risk associated with rising interest rates.
Interest rate swaps can be used to convert variable-rate liabilities into fixed-rate liabilities, thereby reducing the risk associated with rising interest rates.
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