McPhail, Lihong Lu; Schnabl, Philipp; Tuckman, Bruce - National Bureau of Economic Research - 2023
We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and … average bank has a large notional amount of swaps-- $434 billion, or more than 10 times assets. But after accounting for the … swaps: a 100-basis-point increase in rates increases the value of its swaps by 0.1% of equity. There is variation across …