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Performance of maturity transformation strategies

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  • Schmidhammer, Christoph
  • Hille, Vanessa
  • Wiedemann, Arnd

Abstract

This paper analyses theperformance ofmaturity transformation strategiesduring a period of high and low interest rates. Based on German government bond yieldsfrom September 1972 to May 2019,we construct a rolling window of bond ladders where long-term assets are financed by short-term liabilities. Risk and return increase significantly with maturity gaps for both sample periods. During theperiod of low interest rates,dominant strategies can be observed for short-term and medium-term gaps.With respect to different financial reporting standards,weaddress maturity transformation results froman earnings-based perspective as well as froma market value-based perspective.

Suggested Citation

  • Schmidhammer, Christoph & Hille, Vanessa & Wiedemann, Arnd, 2020. "Performance of maturity transformation strategies," Discussion Papers 58/2020, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:582020
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    More about this item

    Keywords

    Maturity Transformation; Bond Ladders; Period of Low Interest Rates; Performance; Interest Rate Risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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