Drechsler, Itamar; Savov, Alexi; Schnabl, Philipp; … - National Bureau of Economic Research - 2023
. Prior work shows that banks hedge the interest rate risk of their assets with their deposit franchise: when interest rates … rise, the value of the assets falls but the value of the deposit franchise rises. Yet the deposit franchise is only … is absent at low interest rates but appears when rates rise because the deposit franchise comes to dominate the value of …