Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142700
Authors: 
Memmel, Christoph
Seymen, Atılım
Teichert, Max
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 22/2016
Abstract: 
We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk-averse and risk-seeking behavior depending on the level of profits, we show that this relationship may get weaker and even change its sign at low profit levels. For the period 2005-2014, we find not only the common positive relationship of higher expected returns and rising interest rate exposure but also that this relationship does become weaker with falling operative income, its sign eventually changing.
Subjects: 
banks' risk taking
exposure to interest rate risk
low interest rate environment
JEL: 
G11
G21
ISBN: 
978-3-95729-270-4
Document Type: 
Working Paper

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