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Title:How correlated are changes in banks' net interest income and in their present value? PDF Logo
Authors:Memmel, Christoph
Issue Date:2010
Series/Report no.:Discussion Paper Series 2: Banking and Financial Studies 2010,14
Abstract:We 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.
Subjects:Interest rate risk
term transformation
interest income
change in present value
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

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