I present an analytical valuation framework for the management of fixed-income instruments traded in imperfectly competitive markets, like demand deposits and credit card loans in the banking book, inter alia, to stabilize the abnormal profit margin. Banking book instruments contain embedded...

We study interest rate risk at U.S. banks by measuring the impact of interest rate changes on banks' earnings and net worth. Changes in interest rates affect (i) future earnings by altering income and expenses from rate-sensitive assets and liabilities and (ii) current net worth by altering the...