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Consumer Mortgage Portfolio Hedging with Interest Rate Swaps

In: Derivatives Applications in Asset Management

Author

Listed:
  • Joseph Niehaus

    (Jefferies | The CUFS Group | Credit Union Financial Services)

Abstract

This chapter presents a real-world application of interest rate swaps in consumer mortgage portfolio hedging, as implemented by a credit union. Facing a liability-sensitive balance sheet, the credit union uses pay-fixed swaps to reduce asset duration and align it with liability duration, thereby stabilizing equity during interest rate fluctuations. The case details the operational and accounting benefits of using the “last-of-layer” method under updated accounting standards, showcasing how derivatives can be strategically employed for balance sheet stability in community financial institutions.

Suggested Citation

  • Joseph Niehaus, 2025. "Consumer Mortgage Portfolio Hedging with Interest Rate Swaps," Springer Books, in: Frank J. Fabozzi & Marielle de Jong (ed.), Derivatives Applications in Asset Management, chapter 0, pages 251-263, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-86354-7_15
    DOI: 10.1007/978-3-031-86354-7_15
    as

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