How correlated are changes in banks' net interest income and in their present value?
AbstractWe use portfolios of passive investment strategies to replicate the interest risk of banks' banking books. The following empirical statements are derived: (i) Changes in banks' present value and in their net interest income are highly correlated, irrespective of the banks' portfolio composition. (ii) However, banks' portfolio composition has a huge impact on the ratio of changes in net interest income relative to changes in present value. --
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Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2010,14.
Date of creation: 2010
Date of revision:
Interest rate risk; term transformation; interest income; change in present value;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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