Wall, Larry D.; Shrikhande, Milind M. - Federal Reserve Bank of Atlanta - 2000
Individual loans contain a bundle of risks including credit risk and interest rate risk. This paper focuses on the … suggest that if the hedge is not subject to basis risk, then hedging dominates a strategy of “do nothing.” Whether hedging … of eliminating all risk via selling. If the hedge is subject to basis risk, then a “do nothing” strategy may dominate the …