Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172529
Authors: 
Memmel, Christoph
Year of Publication: 
2017
Series/Report no.: 
Bundesbank Discussion Paper 35/2017
Abstract: 
This paper investigates determinants of banks' structural exposure to interest rate risk in their banking book. Using bank-level data for German banks, we find evidence that a bank's exposure to interest rate risk depends on its presumed optimization horizon. The longer the presumed optimization horizon is, the more the bank is exposed to interest rate risk in its banking book. Moreover, there is evidence that banks hedge their earnings risk resulting from falling interest levels with exposure to interest rate risk. The more a bank is exposed to the risk of a decline in the interest rate level, the higher its exposure to interest rate risk.
Subjects: 
interest rate risk
banks' business model
hedging
JEL: 
G21
ISBN: 
978-3-95729-411-1
Document Type: 
Working Paper
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